The approval of WhatsApp to launch its in-chat payments features in India and Brazil this month [November 2020] is likely to expand the number of people making mobile payments in the two countries. But it will also bring increased competition to an already fiercely contested market populated by large global players and local providers alike and could introduce an extra layer of integration complexity for the financial institutions and merchants involved.
Owned by Facebook, WhatsApp began testing its payments service in India as far back as 2018 built on instant real-time payment system developed by the National Payments Corporation of India in 2016. The unified payments interface (UPI) is designed to enable users to send and receive money between multiple bank accounts using a single mobile app. It encompasses various methods, including virtual payment addresses (UPI ID), mobile telephone numbers, account and Aadhaar numbers, and QR codes.
UPI has proved a phenomenal success in India, with the volume of transactions reported to have exceeded 2 billion in October 2020, up 15% on the previous month to be worth a total of almost US$44m. At last count, over 189 banks and financial institutions offer UPI-based services, allowing app users to transfer money between multiple accounts from different providers. The pace of adoption has been accelerated by Coronavirus lockdown restrictions which have reduced the volume of cash and physical transactions in India and forced its citizens to find other means of paying for goods and services online. The fact that it took UPI three years to reach the 1 billion mark, while transaction volumes doubled in the last 12 months to 2bn tells its own story.
Alignment with Reliance Jio subscriber base
Fears that UPI based payments would entice Indians away from electronic wallets (eWallets) do not yet appear to have been realised, largely because almost all the companies providing eWallets have linked their platforms to UPI.
Google Pay, Samsung Pay and Amazon Pay now offer UPI services and eWallets in India, for example, alongside Flipkart (Walmart)-owned PhonePe. Another homegrown Indian company, Paytm also commands a substantial market share, while some telcos offer their own UPI-based mobile payments services, including Airtel through its Airtel Money eWallet. Of the 2 billion UPI transactions completed in October 2020, PhonePe is estimated to have accounted for 835m, Google Pay 820m, Paytm 245m and Amazon Pay 125m.
Despite the dominance of those companies, the possible alignment of WhatsApp Pay and Reliance Jio is bound to set some nerves jangling after WhatsApp owner Facebook purchased a US$5.7bn stake in the telco in April 2020. Reliance Jio is estimated to have a subscriber base of 380m people, almost a quarter of India’s population. With WhatsApp having around 400m Indian subscribers of its own, the potential for cross-selling of digital services between the two user bases is significant.
An early example of that strategy saw Reliance Jio’s JioMart online grocery delivery service go live on WhatsApp in certain regions of the country, allowing WhatsApp users to place their orders through the platform but pay at a physical store. The US$5.7 billion investment is also expected to expedite WhatsApp Pay’s integration with other Jio services, including instant messaging software Jio Chat, TV application Jio TV and cloud service Jio Cloud. It remains to be seen how WhatsApp Pay will sit alongside Reliance Jio’s existing mobile payment and eWallet app JioMoney however, though again it is possible that the two services can complement each other.
Brazil next for WhatsApp Pay
Reports suggest a double win for WhatsApp Pay, with Brazil’s central bank set to approve the service after first suspending it in June 2020. The change of heart coincides with the launch of a state-owned instant payment system – Pix – this month [November 2020] which will allow Brazilians to pay and receive payments for purchases by scanning a QR code or activating NFC with their smartphones.
The mobile payments market was already thriving in Brazil before the introduction of Pix (read more detail in DOCOMO Digital vice president of Europe & Latin America Luisa Muneratti’s recent blog here). The close integration between eWallets and Pix is expected to boost end-user transactions volumes further. Although, competition between different suppliers – everybody from global payment providers to local players, financial institutions and telcos – will inevitably become more intense.
Consultancy firm Oliver Wyman has already forecast that Pix is likely to account for 22% of all electronic payments in Brazil by 2030, with a reported 750 merchants, including ride-hailing firm Uber, having already signed up to support Pix payments. In the first week of its operation, there were 2.2m transactions worth a total of around US$1.7bn.
Pix allows consumers and companies to make money transfers 24 hours a day, seven days a week, without them needing debit/credit cards. While it is free of charge for individual consumers, there is a 4% fee for merchants (waived for the first six months in a campaign designed to promote adoption). Any eWallet which integrates QR codes can make and receive payments using Pix without the participation of acquirers, card schemes or issues as long as the eWallet is pre-registered to draw funds from a linked account. That represents a significant boost to eWallet interoperability and payment convenience which should drive much larger volumes of transactions and the number of people using them.
Brazilian mobile network operators (MNOs) Claro and TIM announced that they would allow their customers to be able to pay their bills with Pix by reading QR codes. Claro also allows post-paid phone plan purchases and subscriptions to broadband and pay-TV services to be funded through Pix and is testing an integration with its mobile payment app Claro Pay on a limited basis before making it commercially available in January 2021. TIM’s director of strategy and transformation is also confident that Pix will complement its forthcoming app-based wallet app.
Competition and complexity needs assistance
While the debuts of WhatsApp and Pix are likely to increase the adoption of mobile payments amongst consumers and merchants in both India and Brazil, they will also add more complexity and competition to the markets. The Indian regulator has capped market share for any payment service provider at 30% to ensure consumer interests are protected, and no one provider could become a monopoly.
Those providers know that the best route to success is making it easy for customers to fund mobile payments and transactions with as wide a range of merchants as possible. But they also understand that the requisite billing system integration, partner onboarding and regulatory approvals can be difficult and time consuming for companies which need to speed up their time to market but lack experience.
The simpler solution often involves outsourcing responsibility for payment platform operation and management to a specialist third-party provider. Companies like DOCOMO Digital have years of experience in helping MNOs and merchants increase their revenue by enabling fast, convenient payments through multiple sources, including direct carrier billing (DCB) and other alternative payment instruments.
[i] UPI transactions cross 2 billion/month, The Indian Express, 3rd November 2020
[ii] Brazil launches instant payments platform; expects WhatsApp to return soon, Finextra, 16th November 2020
[iii] Brazil launches ‘Pix’ instant payments system, Whatsapp to enter ‘soon’, Reuters, 16th November 2020