Despite hurdles, Zuckerberg sees huge demand for WhatsApp payments in India

Facebook's misses Street estimates in June quarter; share price falls almost 20% in after-hours trading, eroding roughly $120 billion from the company's market cap

While Facebook-owned instant messaging app WhatsApp might have hit a roadblock in rolling out its integrated payment solution for its 200-million-plus users in India, Chief Executive Officer Mark Zuckerberg on Wednesday told investors that the feedback from initial users had been extremely strong.

WhatsApp began testing its payments feature which is based on the Unified Payments Interface (UPI) in February, with an initial base of 1 million beta testers. Enabling UPI payments through the app is expected to be a game-changer, given its large base of users, but apprehensions over data privacy and security have meant that the Reserve Bank of India (RBI) hasn’t signed off on its wider rollout just yet.

“...of the people who have tested this (WhatsApp Payments), feedback and usage have been very strong. All signs point to a lot of people wanting to use this when the government gives us the green light,” said Zuckerberg in a call with investors after the company’s second quarter earnings on Wednesday.

One of the biggest concerns that the Indian government has expressed with WhatsApp’s payment feature is how user data will be stored. The Ministry of Electronics and Information Technology (MeitY) had asked the company and its partners to furnish more details about the payment system, according to a Bloomberg report.

The government’s stand on ensuring privacy and security comes after several players in the digital payments industry pointed to alleged flouting of norms by WhatsApp to roll out its payments feature. Vijay Shekhar Sharma, founder and CEO of Paytm, among the loudest critics, even said that he was asked by the NPCI to delay the launch of UPI payments on Paytm to favour global giants Google and WhatsApp.

In the meantime, Zuckerberg said that WhatsApp had already begun focusing on building similar services in other markets. Payments is one of the most important pieces for WhatsApp, which, rather than earning money by showing ads to customers, wants to monetise by becoming a service that brands use to interact with their customers.

“Over the next five years, we're focused on building the business ecosystem around messaging on WhatsApp and Messenger,” Zuckerberg added. Messenger is the instant messaging app that spun out from Facebook’s very own platform, while WhatsApp was acquired by the company in 2014 for a massive $19 billion.

Overall, Facebook reported a year-on-year growth of 11 per cent in the number of daily active users on its platform, which it attributed to growth in India, Indonesia and the Philippines. This came despite a slight fall in daily active users in Europe which saw the rollout of the General Data Protection Regulation (GDPR) in the second quarter.

While growth in emerging markets continued, the company reported a de-growth in Europe and flat growth in the US and Canada. This caused the company to miss Street estimates and compounded fears that users were not flocking to the social network like before due to privacy issues unearthed in the Cambridge Analytica scandal.

Facebook’s share price fell almost 20 per cent in after-hours trading, eroding roughly $120 billion from the company’s market cap. Besides, investors were rallied to sell by the company’s warning that revenue growth would decelerate by high single digit percentage per quarter in the coming quarters due to currency headwinds, new privacy controls and new products like stories.

The company earned a revenue of $13.23 billion in the quarter that ended June, a 42 per cent year-on-year growth, while profits for the quarter stood at $5.106 billion.