Can WhatsApp Race Ahead Of GPay, Paytm And PhonePe In Becoming India’s First Fintech Super-App?

In December this year, Facebook-owned WhatsApp reiterated its focus on offering a broad range of financial products for India such as microcredit, health insurance and pension plans. Speaking at Facebook’s Fuel for India 2020 event, Abhijit Bose, the India head for WhatsApp, said that the company had been piloting some of these products over the past few months and these could go live by the end 2020. With a slew of financial services about to be launched, WhatsApp could be well on its way to becoming another fintech super-app contender in India. But before exploring such possibilities, we need to understand the kind of services that must be wrapped up in a messaging app to gain that coveted status.

Super-apps are no longer a novelty in a digital-first world ruled by the ‘anything-anytime’ operational motto. Simply put, a super-app is a mobile platform that offers a wide range of services bundled within a single app. These ubiquitous everything-apps came to prominence in China nearly a decade ago as the likes of WeChat (debuted by Tencent) and Alipay (a product of the Alibaba Group) diversified from messaging services and mobile payments to offer hotel and ticket booking, food delivery, cab-hailing and various fintech products. 

According to a Morgan Stanley report, the potential market for app-based fintech products could be huge, given that the super-app market size in South Asia itself is estimated to be $4 Bn. India, too, can offer similar opportunities as essential services across the economy are bound to increase. For instance, health insurance in India, a below-par 4% of the GDP (gross domestic product), is much lower than the world average of 6.31%. Hence, fintech players are eyeing exponential growth in this segment.  

Interestingly, Facebook’s founder and CEO, Mark Zuckerberg, had meticulously followed the spectacular rise of WeChat, according to media reports. Now that he owns another could-be powerhouse with global prospects, he is not likely to let go of this opportunity. And where else to debut the next super-app if not in India, home to a burgeoning market where it has already built a massive following as the internet and smartphone penetration grow? Add to that the next billion digital-first customers hailing from the hinterlands, and one could easily decipher why India remains the most important market for WhatsApp in its fintech avatar.

The only catch: WhatsApp’s fintech journey in India has not been smooth so far. 

After two years of regulatory hurdles, the green light from the National Payments Corporation of India (NPCI) came this November for the launch of UPI payments on the WhatsApp platform. But the messaging app has not been allowed to go full throttle. In the first phase, WhatsApp Pay can onboard up to 20 Mn users, just a fraction of the messaging app’s 400 Mn user base in the country, thanks to a 30% transaction volume cap imposed by the NPCI to protect the UPI ecosystem from a possible monopoly. 

But when the likes of Paytm, PhonePe and Google Pay have already established their presence in the UPI payments space, it is even more crucial for WhatsApp to explore other fintech solutions to roll out its fintech play as quickly as possible. Time is a premium here if WhatsApp wants to transition from an encrypted connector of friends and family members into a mega-service.  

Why Everyone Wants To Be A Fintech Super-App In India

The Indian fintech app space is all too crowded, and there is no clear winner so far even among the top players. In India, Jeff Bezos-led Amazon Pay, Vijay Shekhar Sharma’s Paytm and Walmart-Flipkart-owned PhonePe are trying to evolve into super-apps with several other conglomerates eyeing the big league. 

Inc42 asked fintech companies what they thought should be the key services for an app to make it to India’s super-app league. The top suggestions included a bouquet of solutions that would cover all kinds of payment solutions, bill payment, insurance, loans and gold loans and investment features. However, no company has equal expertise and penetration across all segments. For instance, Amazon specialises in ecommerce, bill payments and other payments solutions. Paytm is spread across payments, bill payments, investments, shopping and gaming. PhonePe offers a similar range of offerings. Plus, there are a few telcos who are building several fintech and entertainment solutions.

In other words, no single fintech app (or telcos, for that matter) can crack the code in the way Alipay or WeChat did. In China, where super-apps are immensely popular, Alipay and its rival WeChat Pay account for 90% of the country’s mobile payment market. According to marketing research firm iMedia Research, this market is worth about $52 Tn, and there are about 790 Mn active users on these payment platforms. 

In India, most of the fintech players focus on peer-to-peer (P2P) or merchant payments (as in online transactions) solutions, but few offer B2B solutions for MSME players.   

According to Reeju Datta, cofounder of Cashfree, a payments gateway solutions company, solutions like bill payments, loans and investments might make these apps useful for consumers, but the Indian market needs much more. “The MSME market should have its own set of solution-oriented apps. But it is doubtful whether any of the existing fintech apps can meet this requirement. There will be solutions for marketplaces and kiranas or even ERP requirements, but a one-size-fits-all offering is unlikely to work,” he says.

Nityanand Sharma, cofounder and CEO of Simpl, a platform focussed on pay-later services (a form of short-term credit product), notes that there are very few fintech super-apps which have succeeded outside China. In fintech, solution-focussed apps will continue to lead the way, he adds. “Almost a decade ago, there was a specific time and a specific requirement in China that triggered the growth of super-apps. But that may not be the case now as people choose to keep their communication platforms separate from financial apps where a different level of trust and user interface is required,” says Sharma.

What WhatsApp Can Offer

Although requirements have changed, a messaging app may bring several new opportunities to traditional fintech players, say industry experts. According to WhatsApp parent Facebook’s marketing solutions playbook, product discovery is an important cycle in the purchase journey, and people believe that WhatsApp can be effectively used here.

“Social plus finance offering will bring the next wave of fintech products in the country. We generally tend to ask our friends and acquaintances for recommendations on financial products because we trust them. That is why WhatsApp’s entry in the fintech space is significant,” says Vikas Kothari, cofounder of P10 Bank, a digital bank designed for young working professionals.

Kothari thinks a big layer in the fintech consumer acquisition journey is ‘discovery’ where a platform like WhatsApp can provide useful information based on the conversations happening on the app. While fintech-specific apps are really useful when people know what they want, a trusted network of personal finance experts is an area that the messaging app can leverage for a young and new-to-finance user base. 

“It finally boils down to how many choices an app can offer to the fintech consumer. While offering suggestions or running chatbots are B2B services, core fintech solutions require a human interface, regulatory checks and a Know-Your-Customer or KYC-compliant customer onboarding framework beyond the basic technology requirements of a communication service,” says Gaurav Chopra, founder and CEO of IndiaLends, an online lending aggregator. 

In spite of the stickiness and potential of WhatsApp in a new avatar, the reality could be grim. As discussed before, it is a late entrant to the fintech game and its technology peers have already created their niche audience bases and bespoke services. In contrast, WhatsApp is taking baby steps in terms of service range and will initially offer affordable health insurance plans from SBI General Insurance. It is also planning to provide micro-pension products (small amounts of money individually saved and invested collectively) and has tied up with HDFC Pension Management and pinBox, a digital micro-pension company, to offer retirement plans. WhatsApp has partnered with HDFC Bank and ICICI Bank, among others, enabling them to send automated text messages to customers as a B2C communication service. The company also works with Mukesh Ambani-led JioMart to collate online grocery orders. 

WhatsApp already has a vast user base, one of the primary requirements of a super-app. But right now, it has too few services to offer and must build and maintain its fintech muscle. The variety of its product portfolio and the speed of implementation will determine whether it can topple the incumbents in India and win the fintech race.