WhatsApp to bet big on payments in India after NPCI nod for 100 mn users

Monthly volume of transactions has stagnated on the platform in the past six months, but value of transactions has doubled

A day after getting permission to raise its Unified Payments Interface (UPI) user base to 100 million, WhatsApp on Thursday said it has plans to make significant investments in ‘payments on WhatsApp’ across India, including India-first features and driving adoption.

The company, however, did not share details of its plans.

The Meta-owned messaging app got its first greenlight for its payments service from the National Payments Council of India (NPCI) in November 2020 with a cap of 20 million users. A year later, in November 2021, the limit was raised to 40 million users. On Wednesday, the NPCI relaxed the cap on WhatsApp Pay to 100 million.

“UPI has been an unquestioned success, and we believe there is an opportunity for UPI to have even greater impact for the country — especially in rural regions where digital and financial inclusion can significantly improve people’s lives,” said Manesh Mahatme, director, payments, WhatsApp India.

Industry insiders, however, say NPCI’s reluctance to allow WhatsApp to extend the service to all of its estimated 500 million users in India has hamstrung its plans.

“Without being allowed a 100 per cent roll-out, WhatsApp Pay won’t be able to take off in India as there won’t be a good case to make for incentives and marketing. Suppose you give a cashback to a user and onboard him, but the people he transacts with cannot be brought on via a referral, then your money goes down the drain,” says a fintech founder who does not want to be named.

“My reasoning is — 20 per cent of the total user base won’t still be able to do peer-to-peer transactions with 80 per cent users within WhatsApp and that limits the overall user experience,” he adds.

When WhatsApp Pay was allowed to onboard up to 40 million users, the number of transactions per month on its platform remained stagnant at around 2.6 million for the past six months. However, the cumulative value of the transactions rose more than twofold to Rs 240 crore in March, compared to October last year. 

According to the NPCI data, WhatsApp accounted for a miniscule 2.54 million transactions in March when the UPI ecosystem saw 5 billion transactions in total. As of last month, PhonePe led the UPI universe with 47 per cent market share, Google Pay was at 34 per cent, Paytm 15.4 per cent, Amazon Pay 1.41 per cent, and WhatsApp Pay 0.04 per cent. Other players had around 2 per cent of the market.

Some experts are of the view that WhatsApp Pay’s strategy may be to attract Tier 3 and beyond users first as those geographies are still largely unpenetrated by fintech. 

For instance, in December, the company launched a pilot programme of adopting 500 villages across Karnataka and Maharashtra to familiarise villagers with digital payments through its UPI feature. In a video shared by the company, village shopkeepers can be seen asking customers to pay through a WhatsApp QR code, similar to merchant QR codes offered by fintech players like BharatPe and Paytm.

“This adoption drive is like a surrogate marketing activity as WhatsApp is trying to educate the population through small value transactions and remittances. Based on its outcome, it could expand such marketing efforts,” Mihir Gandhi, partner at management consulting firm PwC, had told Business Standard earlier.