Will WhatsApp be Africa’s biggest payments a platform?


2018-07-02 / www.paymentscardsandmobile.com

The ambitions of WhatsApp have been viewed as something of a mystery, even as its reach as a messaging service and as the social media platform of choice for Africans has grown and grown.
WhatsApp's competitive advantage is in emerging markets, where its service almost always works, regardless of internet speed or available bandwidth. It's the world's No.1 messaging service, thanks to users from Latin America to Africa and most of Asia outside China.

In these regions, there's intense interest from local businesses that want to see WhatsApp commercialise-they want to be able to use the platform more efficiently to transact with their customers who pretty much live on it.
Facebook understands that. "The wave of disruption we'll see from Africa will come from small companies more so than from big corporates," Julien Decot, Facebook's director of platform partnerships for EMEA, said at the MEST Africa Summit in Cape Town, South Africa. "It's clear those companies will probably jump directly to WhatsApp to connect to their prospective customers and get their businesses discovered."
The first move: creating a WhatsApp Business app for millions of small businesses to reach their customers. The next: "fixing the plumbing" by enabling key services like payments and discovery and then identifying the "underlying business model," Decot explained. "If we connect many millions of consumers with many millions of businesses, at some point the businesses will pay us to get in front of more customers - We don't have to reinvent the wheel."
WhatsApp Business has been something of a Trojan horse for the platform's commercial potential. "It's already big, larger than we would have expected, with several million users," he said, declining to reveal specific numbers. He described the total as "already very material" even when viewed in the context of Facebook's 70 million global advertisers.
WhatsApp is documenting business-user behavior in order to optimize for the largest use cases and is particularly focused on the big opportunities in payments and discovery. There could a huge reward for over a billion people to move money around globally and could easily dominate in sub Saharan Africa where it is the default social media platform.
In countries where WhatsApp has gained major market share, central banks and other financial regulators will naturally be concerned about its impact. In India, where WhatsApp has around 200 million users, it has been testing its payments product since February.(*)
"We'll do it here [Africa] too. No matter what, it's a function of how quickly we can get it done. WhatsApp is at a scale where regulation is tricky," said Decot. He confirmed conversations with some African regulators have already started.
A WhatsApp payments product could at once boost and upend the nascent African digital payments sector that FinTech startups from Lagos to Nairobi and Cape Town are all working frantically to build. It might be the one time startups reach out to regulators to help protect their future.
While there's no guarantee WhatsApp will be Africa's biggest payments player in the long term, if it is able to navigate the regulatory environment in larger African economies like South Africa, Nigeria and Kenya it would have a significant headstart over local FinTech startups.


(*)   WhatsApp's payment gateway is based on the unified payments interface (UPI) of the National Payments Corporation of India (NPCI), cutting out the cumbersome intermediary step of loading money onto a wallet. Instead, users can transact directly from their bank accounts using a virtual ID.
The Facebook-owned messaging app has its eye on India's flourishing e-payments pie, slated to grow five-fold by 2023 to $1 trillion, according to investment bank Credit Suisse. However, due to compliance issues, the company has thus far been slow in making inroads. First, it required government permission to tie up with banks in the country. Then, in April, the Reserve Bank of India (RBI) issued new norms instructing payments companies to store data locally.
In April, WhatsApp floated an advertisement for an India head. This was yet another signal that it is getting serious about the India opportunity, including making headway in payments, according to analysts.
Even before its full-fledged debut, WhatsApp has sent ripples through the industry, unsettling both newcomers and incumbents.
Payments disrupted
The messaging app's entry into the payments segment could stifle upcoming players. Most e-wallet operators in India are anyway not profitable yet. Now the government's introduction of UPI poses a threat for smaller companies while helping the ones with deep pockets, like Google Tez, and soon WhatsApp. UPI is eating into wallets because while essentially they both serve the same purposes, UPI is easier to use since it's directly linked to bank accounts. And there are more bank account-holders than those who use wallet apps.
Also, given WhatsApp's huge user base, introducing the payments feature could help it lock customers within its ecosystem. If friends or family ask for money, a user can easily make that payment from within the app without switching screens.
On WhatsApp, such a feature holds the promise of going beyond P2P payments since many businesses have already found a home on the platform. Travel bookings and movie tickets are often sent to customers via the chatting app. Offline retailers have moved from SMSes to WhatsApp messages to relay promotions. And considering UPI's transaction limit is a massive Rs1 lakh ($1,470), bigger ticket sizes won't deter users either.
Even market leader Paytm seems shaken. Last November, the digital payments company moved to level the field with WhatsApp by adding a messaging feature to its app. Days after WhatsApp began testing payments, Paytm founder Vijay Shekhar Sharma lashed out on Twitter, alleging WhatsApp was trying to monopolise and cannibalise the market.