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Whatsapp and payments… a marriage made in heaven?

Slowly but surely, a small selection of apps are taking over the world. These giant, all-consuming applications give their users access to social media, messaging, shopping, entertainment, and increasingly, banking and payments services too. Whatsapp is one such giant.

   Whatsapp's rise

Facebook’s $19 billion acquisition of the messaging app, Whatsapp, in 2014 seemed like a slightly odd purchase at the time given that they already had a messaging function integrated into their product and they weren’t short of users. But Whatsapp’s growth and popularity have made that seemingly expensive purchase look like incredible value.

Since then, Whatsapp’s user numbers and engagement have been steadily growing, with Mark Zuckerberg confirming last year that Whatsapp had 1.5 billion users and was seeing 60 billion messages sent every day, with user numbers tripling since Facebook bought it. Forecasters were predicting impressive growth for 2018 and 2019 too. Whatsapp’s popularity is largely down to its strategy of keeping things simple and doubling down on its core messaging functionality.

   Where next?

One interesting development that’s taken place over the last year looks set to impact Whatsapp’s approach and will make the world’s largest apps sit up and take note too. It seems that 2019 could be the year when Whatsapp adds payment functionality to its product.

Whatsapp Pay has been functional in India for about 18 months, tested by about a million users who are providing a test bed for what could soon become a rollout of the product worldwide. India is WhatsApp’s biggest market, with over 200m users, and it seems that the payments feature has attracted a growing number of business customers from the region too.

The product allows users to exchange money, receipts and share payment confirmations with customers and suppliers. Crucially, it’s overseen by the Indian government’s UPI payments system. It seems that Whatsapp and Facebook don’t see themselves becoming banks anytime soon. Rather, they are a channel via which payments can be made. Therefore, infrastructure partners in financial services, like UPI, are essential for payments to work securely.

Interestingly, Whatsapp (or rather, parent company, Facebook) is monetising Whatsapp Pay from the off, with a flat fee charged on every transaction. In the long run, data gained from user transactions will help Facebook to raise the rates that they charge to advertisers too.

   A global offering

For WhatsApp, the trial in India looks like it could be the first step towards tapping into a hugely valuable source of data around how their billions of users spend their money. The payments market is massive in India and set to grow to over $1 trillion by 2023. Payments companies know it’s a huge opportunity but the competition is fierce, with Chinese giants like WeChat and AliPay looking to grow their market share beyond China.

The extraordinary growth enjoyed by the biggest apps on earth means that they are beginning to come into direct competition with one another. For example, WeChat and AliPay have dominated in China but they are increasingly looking to move into other portions of Asia too. Whatsapp is a global competitor in the messaging space, but it remains to be seen whether it wants to take them on in the payments space, potentially on their own turf, in China.

Since being blocked in 2017, Whatsapp hasn’t been able to operate inside of mainland China. Such is the WeChat and AliPay’s stranglehold - thanks in no small part to their tie-up with the Chinese Government, with whom they share all their data - it would seem that this is a market that may be beyond the ambition of WhatsApp for now. They will likely focus on building market share in geographies where they already have a foothold, like India, Europe and the US.

   To India and beyond

Given the success of Whatsapp Pay in India, the big question must be whether WhatsApp sees WhatsApp Pay as a feature that they want to roll out to users in the rest of the world. Given the size of the Indian market, it has been prudent for them to launch into such a fertile geography, but literally, billions of other users all over the world could be interested in this feature too.

Intriguingly, Facebook recently added payments features to its Messenger app, and it might follow that they were preparing to rollout Whatsapp Pay in Europe and the US too. Facebook values Whatsapp’s laser-focus on messaging and it’s clear that it doesn't want to dilute that functionality by adding on features that confuse users and detract from the core intention of the app. But the potential size of the payments business that they could build off the back of their billions of engaged and loyal users might be too good an opportunity to pass up.

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