WhatsApp, the most popular messaging app in India, has been working on introducing person-to-person payments in the country. With the feature available to a small section of WhatsApp users in India, the feature is expected to roll out to all of the over 200 million WhatsApp users in India soon.
While WhatsApp may seem to be focusing on peer-to-peer payments, the Facebook-owned app is already home to several businesses that stand to benefit via an in-built payments feature. Could WhatsApp Payments become as ubiquitous in India as WeChat Pay is in China? City-based payments platform Razorpay, which processes 24 million transactions a month, is certainly betting on it.
Right now WhatsApp Payments - if you’ve received the feature - lets you send and receive money from people. That’s great if you’re running your business only via WhatsApp, but not if you also allow people to buy your goods elsewhere. Enter Razorpay, which has integrated WhatsApp Payments into its platform used by digital businesses that aims to make that possible on Android devices.
Harshil Mathur, CEO of Razorpay, tells Gadgets 360 that the company sees WhatsApp Payments taking off big time in India because of the app’s large install-base, but also since it builds on top of UPI, while hiding some of its complexity.
“The good thing about UPI is that guidelines are interoperable,” says Mathur. “Only change is the way is the way WhatsApp presents it. WhatsApp doesn’t show you the VPA. Customers don’t know or recognise their VPA.”
VPA stands for virtual payment address, which is what you need to send or receive money via UPI. Apps such as WhatsApp and Google Tez make it easy to get started by with mobile payments, but since they hide the VPA deep in the app, they also make it difficult to use them with other UPI-based platforms. This presents a challenge for payments companies such as Razorpay.
“WhatsApp has an obfuscated way of assigning VPAs. In WhatsApp it is phonenumber.ok.usb@okicici or something. WhatsApp customers won’t remember their handle so we used a feature of Android called Intent,” explains Mathur.
“When a customer clicks UPI we use that Intent API to show a list of apps that support UPI payments,” he adds. “Then when he chooses WhatsApp Pay, through Intent we will call WhatsApp and through deep-linking they will see the payment details pre-filled and then they go back to the original app. Particularly in this flow customers won’t need to know their handle (VPA).”
That’s a pretty clever workaround for a platform that many believe could herald the next wave of payments revolution in India.
Can WhatsApp Payments take UPI to the next level? “With over 250 million user base in India (second only to Paytm which has 310 million user base) WhatsApp already has a strong user base to extend this service to,” says Anuj Agrawal, Senior Research Manager, IDC Financial Insights. “At present we have observed about 190+ million UPI-based transactions amounting to Rs. 270 billion in April 2018. Just going by these numbers even if WhatsApp is able to migrate 10 percent of active UPI-based payments users to its platform in initial few months of its full-fledged operation, it will translate to 19 million transactions per month amounting to Rs. 27 billion value of the transaction for them.”
"So here,” he adds, "the bigger question is: How fast can WhatsApp leapfrog adoption of its payment feature among its user base?"
“Once fully launched, WhatsApp Payments can spread like wildfire,” says Arnav Gupta, a researcher at market research company Forrester Research India. But they’ll have to ensure that the user experience is as simple as sending a text message.”
Talking about the bigger picture, he says, UPI has the potential to cause a disruption beyond wallets and peer-to peer-payments. “UPI as a payment mode has the potential to disrupt the whole card business,” says Gupta. "While the threat is not immediate, but payment networks such as Master Card/Visa must not take UPI lightly.”
If WhatsApp Payments becomes so easy to use, that means it’s also easy to misuse. Gupta feels that payment security is the biggest challenge for WhatsApp.
“Digital wallets created an impact in a country like ours,” he says. "Why? Because of offers/cashbacks, but also because digital wallets allow customers to have a control on the potential loss of money in case of an unfortunate event. With the potential loss being limited to the amount of money in a user’s wallet account.”
Most people aren’t going to be keeping their entire life’s savings in a wallet app such as Paytm, but WhatsApp Payments is UPI-based. This means that your primary bank account could be linked to it and scammers have a much bigger target.
“With WhatsApp UPI payments, users’ potential loss increases to Rs. 1 lakh — which is substantial for a large segment of its users,” Gupta continues. "WhatsApp will have to carefully look at how they will resolve fraud related issues or transactions made to wrong beneficiaries or spam money transfer requests, etc.”
When you begin to think of WhatsApp as an ATM, where a large sum can be withdrawn simply by keying in four digits, the need for better awareness and security becomes clearer.
At the same time, if WhatsApp Payments and UPI takes of, they could even threaten credit and debit cards. IDC’s Agrawal says, “At present, companies such as Visa, Mastercard are more worried about the adoption of Rupay card in India. There is still time for them to really start worrying about UPI.”
Simplifying UPI for business Right now UPI transactions mostly centre around person-to-person payments because the platform is optimised towards that. If your business wants to accept payments via UPI today, the flow looks something like this: The customer chooses UPI at the payments page and then they get a payment request notification from their UPI app. They enter their UPI pin in that app and approve the payment, after which they go back to your store page to check if the payment was processed and the order placed.
With Razorpay’s method, a customer needs to just tap the UPI app of their choice on the payments page and that will open the app with all payment details pre-filled. Just enter the UPI pin and you’ll be redirected to the store automatically. This is much smoother and faster than the previous method.
With that said, Razorpay’s method won’t work on all platforms. If you use an iPhone or iPad, UPI payments will be slightly more cumbersome because Apple doesn’t allow an API like Intent, CEO Mathur says. That doesn’t worry Razorpay much because a vast majority of smartphone users in India use Android.
Razorpay says it has seen over 14 percent of its customers click on WhatsApp Payments in India even though the feature is still in beta and not available to everyone. “If payments started working in WhatsApp, people will prefer to use it. Brand recall is very high with WhatsApp,” says Mathur. He adds that around seven to eight percent of payments on Razorpay take place via UPI, with Bhim, Tez, and PhonePe being the most popular UPI apps — in that order. However, he expects WhatsApp to overtake all other UPI apps once it enables payments for everyone.
IDC’s Agrawal agrees. “The contribution of BHIM app to the total volume of UPI-based transactions has already seen a sharp decline from 35 percent in FY16-17 to 10 percent in FY17-18,” he says. “That indicates BHIM as a standalone application is not able to increase its adoption at the same pace as much other UPI-based platforms are able to.”
“…BHIM doesn't innovate and WhatsApp is able to create an ecosystem of buyer and seller who transacts within WhatsApp platform for many more reasons than to just transfer money from peer-to-peer,” he adds.
While services such as IRCTC e-catering have enabled WhatsApp Payments via Razorpay, there’s a long way to go before it goes mainstream. Forrester Research’s Gupta compares WhatsApp Payments with Paytm.
“Think of Paytm’s reach beyond tier-1 cities for a moment,” he says. "Now Paytm definitely created a dent in tier 2/3 cities in digital payments space… but couldn’t have done it without two things. First, demonetisation! And second, cashbacks/ rewards/ offers/ discounts.”
“Unfortunately WhatsApp has none for the moment, but then its reach and popularity shouldn’t be discounted,” he continues. "WhatsApp has the potential to compete with Paytm in tier-2 and beyond cities… But it’ll need to give users a motive beyond ‘the need to make a payment’.”
Disclosure: Paytm's parent company One97 is an investor in Gadgets 360.