Can WhatsApp quickly fix the missing pieces of the payment puzzle?

15th Feb 2018
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WhatsApp Payments, which follows Google’s Tez into India's crowded digital payment ecosystem, and competes with local players like Paytm, must focus on these India-specific problem areas.

It all started a week ago, when news started flowing in about WhatsApp rolling out its payments feature for select Beta users. And, WhatsApp Payments seems to be the starting point of every discussion ever since. The industry is thrilled; after all, one of the biggest players has finally kicked off its operations in payments.

Well, there is a different reality about the 'select Beta' which we will take on later in the article.

An estimated base of more than 200 million Indian users makes WhatsApp an extremely strong competitor in the segment. With its app downloaded and used by millions, the first roadblock - acquiring customers and spending capital to do the same - is easily crossed.

WhatsApp still needs to figure out its secret ingredients to success

Does that mean that the throne of India’s payment leader might go to WhatsApp? Not necessarily. After all, payments across the globe don’t follow a winner-takes-all model.

There is always a used case where one payment system might outperform the other. In case of WhatsApp, it is undoubtedly P2P payments and bill payments.

Jitendra Gupta, Managing Director of PayU India, states,

“How I look at it is that the P2P payments market continues to be quite limited. WhatsApp’s entry should completely open the market. The second good thing I feel is that it will help increase the market size and go after the really small merchants.”

But WhatsApp’s journey of testing payments in India continues to be of a lot of “How will they” and “What if”? And there seems to be a lot which it needs to learn from India’s payment leaders.

Will WhatsApp figure out the UPI conundrum?

This is the first time in the history of the messaging app that it is launching a feature relying on a third party service like Unified Payments Interface (UPI).

Definitely far from its comfort zone, one would say. And UPI isn’t the most foolproof payment system in India, or completely frictionless for that matter.

Sameer Nigam, Co-founder and CEO of Flipkart-owned payment app PhonePe, states,

“As we have seen there has been a reasonable amount of failure even on P2P transactions on UPI. If you go on to the app store and see the comments section of some payment applications, you will see a bunch of users complaining that the end receiver hasn’t gotten their money.”

YourStory has also learnt through sources that one cause of this downtime could be Indian banks. It could be due to the massive load of settlements for banks, especially for bigger ones like SBI. Also, the UPI backends of some of these big banks are third-party operated, which increases the risk.

And since trust is everything in payments, a negative experience like this could create mistrust among users, or even hamper WhatsApp’s pristine 4.4 star rating on the Play Store.

Indian players, on the other hand, seem to have found the solution to this issue.

Sameer adds,

“We have learnt through data on which banks have higher failure rate and automated reconciliations and reversals for such situations. You have to build learning systems. However, in our experience, the bigger the launchpad and users (like in the case of WhatsApp), the more issues a product might face on Day 1.”

WhatsApp is exploring newer territories - and a high friction category – and is sure to take some time to settle.

Bro, where is the customer support?

Failing transactions will bring a strong need for customer support. The Reserve Bank of India (RBI) specifies the need for payment providers to have a direct call number for any grievances. Clearly, it’s important to have a customer support team for WhatsApp Payments.

At PhonePe, an internal chat bot takes care of any such problems. But it will be interesting to see what WhatsApp does. Will it outsource this business function to its partner bank, ICICI, or build this capability from scratch?

Is WhatsApp the new SMS trashbox?

Well, this is a tricky one. Just last month, WhatsApp globally launched WhatsApp Business, a business-focused app.

Naveen Surya, Chairman of Payments Corporation of India, says,

“At the end of the day, WhatsApp is a marketing company, and has been a great marketing tool for small businesses. So it will use the data to help businesses on its platform better target customers. Payments will just be a part of the commerce, helping users complete a transaction. This way, they increase their sale of advertising by taking a part of the sales revenue. Only thing is, payments is not the game.”

However, Indian payment players seem to be finding it impossible for WhatsApp to manage both advertisements and keep the interface clean. Some even feel that WhatsApp may become the new SMS Inbox (Garbagebox).

WhatsApp for Business was launched last month.

Sameer says,

“It is hard to have a clean pristine application like WeChat. Unlike Facebook, which displays advertisements, WhatsApp has been a sweetheart because they haven’t ever monetised the platform. So either they will either gate-keep the advertisements or open it up for all, which might not go down well with customers. They need to find a balance.”

Hence, Indian players like Paytm and PhonePe sound more confident of their UX as their entire app is dedicated to payments and commerce, whereas WhatsApp is focused entirely on messaging.

Does India really understand digital payments?

Another interesting point is that Indian payment companies have invested in localisation. Indian payments leader Paytm claims to be operating in 10 local languages and so does PhonePe.

WhatsApp may have to adhere to that strategy. Sameer explains, “In India, one thing is for sure. People will not spend their money without knowing what’s happening (on the screen).”

PhonePe already claims that close to 20 percent of their users are using languages other than English. For WhatsApp this target base might be even bigger.

However, the messaging giant has solved the problem around how to use its Payment feature. For its Beta version, only users who have the payment option on WhatsApp can allow other users to get the feature. So, this solves half the problem of how to use it (and education) in a real-case scenario.

But that doesn’t necessarily take away the need for localisation.

India loves cashback! 

Everyone knows this. Payment and ecommerce companies in India have spoilt the user with cashback offers – so much so that even Google, one of the biggest entrants in the space, had to enable scratch cards for its Indian payments app, Tez.

“These scratch cards are like cashbacks. They helped Google double its transactions by crediting consumer accounts with the amount they won through these scratch cards (which a customer receives after making a transaction),” says a person seeking anonymity.

This behavior is so prominent that even a small test group in my office chose cashbacks over a seamless experience of transacting on an app they will never have to leave.

While P2P transactions through UPI don’t need incentives like cashback, considering the other option is tedious net banking, payment apps who don’t intend to give cashbacks are forced into them so they don’t lose potential user base.

What’s up for WhatsApp now?

All said and done, industry players are definitely facing the heat of this new entrant.

Sameer says: “We obviously have to work harder and that’s how the way it is. I believe that the size and consumers in the market are matured enough to expect even us to innovate.”

And what of the reality of select users?

While speaking to YourStory, Paytm states that select users or closed group users are invite-only and WhatsApp can decide on whom it selects to roll out its Beta to. However, in this case, WhatsApp is not controlling its users. Rather, users with the payment service can enable the WhatsApp payment option for any user they wish to.

But good, bad, or ugly, the industry agrees on the larger positive impact WhatsApp will have as it enters the payment ecosystem.

Putting it all into a macro perspective, Naveen states, “In the last 10 years, retail payments have grown only 10 percent. However, in the last couple of years, especially post-demonetisation, we have been growing at 30 percent. We need to grow at 100 percent now and that will be tough in the current state. We need bigger players and more capital to drive this kind of growth. From that perspective, WhatsApp’s entry is good for the Indian market.”

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