WhatsApp has picked UPI to enable digital transactions from its app

WhatsApp to offer mobile payment services in India but can it make money out of it
Atom UPI Tuesday, April 04, 2017 - 10:44

The world’s most popular messaging app WhatsApp is working on launching person-to-person payments on the app in the next six months, according to a report by The Ken.

In fact, the company is looking to hire a digital transaction lead with knowledge of Unified Payments Interface (UPI), Aadhaar, and BHIM. The opening, however, will be based out of Facebook’s HQ in California, as WhatsApp has no team in India as yet.

According to The Ken, the company’s primary choice of a payments platform is UPI. WhatsApp first expressed its interest in launching a payments platform when co-founder Brian Acton visited India in February.

In an email response to The Ken, the company did not contest the launch of payments but said, “India is an important country for WhatsApp, and we’re understanding how we can contribute more to the vision of Digital India. We’re exploring how we might work with companies that share this vision and continuing to listen closely to feedback from our users.”

WhatsApp’s choice of UPI makes sense after RBI proposed a slew of restrictions on Prepaid Payment Instruments (PPIs), which are essentially mobile wallets. The restrictions included stricter KYC norms, imposition of limits on the amount stored, transaction caps and addition of an extra step of two-factor authentication (2FA) for wallet transactions.

With the launch of UPI platform and the BHIM app, it is clear that RBI is looking at dis-incentivizing wallets.   

If and when WhatsApp launches payments on its platform, a user will have to create a Virtual Payments Address (VPA) and will then be prompted to set up a UPI VPA to link it to his/her WhatsApp account. According to The Ken, the money will be temporarily held in an escrow account.

In 2015, Facebook launched person-to-person payments as part of Messenger, only for its US users. But in order to make payments, users had to first link their debit cards to their accounts.

However, in India, Facebook’s Messenger is not half as popular as WhatsApp is. Hence, launching payments on WhatsApp in India makes more sense for the social media giant.

However, according to Ken, one challenge for WhatsApp could be that UPI is still in the very early stages of its lifecycle. And the biggest barriers to its adoption are establishing trust, building consumer confidence and overcoming user habit (of using another payment system).

With wallets like Paytm, Freecharge, MobiKwik already becoming immensely popular in India, UPI has not yet become the go-to payment mode for users.

But given the government’s emphasis on UPI, and Whatsapp’s reach in the country, a partnership as such will be a clear win-win for both parties. For Facebook, after its free basics plan saw a major flop in India, getting on the government’s side with UPI makes sense. And for the government too, Ken says getting WhatsApp to use UPI will be a ‘chest-thumping moment’.

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