WhatsApp gets nod for UPI money transfer in India; what does it mean for the payments space?

WhatsApp has got the official nod from the NPCI to enable payments. What are the implications for the digital payment space?

WhatsApp has got a nod from the government to facilitate payments via Unified Payments Interface (UPI). This secure payments experience makes the transfer of money just as easy as sending a message.

A blog post mentions that people can now safely send money to a family member or share the cost of goods from a distance without having to exchange cash in person or go to a local bank.

WhatsApp designed the Payments feature in partnership with the National Payments Corporation of India (NPCI) using the UPI. It is the first of its kind in India, real-time payment system that enables transactions with over 160 supported banks.

To send money on WhatsApp in India, it’s necessary to have a bank account and debit card in India. WhatsApp sends instructions to banks, also known as payment service providers, which then initiate the transfer of money via UPI between the sender and receiver bank accounts.

WhatsApp will be working with five major banks in India: ICICI Bank, HDFC Bank, Axis Bank, State Bank of India (SBI) and Jio Payments Bank. People can send money on WhatsApp to anyone using a UPI supported app.

“In the long run, we believe the combination of WhatsApp and UPI’s unique architecture can help local organisations address some of the key challenges of our time, including increasing rural participation in the digital economy and delivering financial services to those who have never had access before,” mentions the blog post.

It also mentions that WhatsApp Payments is designed with a strong set of security and privacy principles, including entering a personal UPI PIN for each payment. Payments on WhatsApp are now available for people on the latest version of the iPhone and Android app. What does the entry of this new player mean for others in the UPI space? We spoke to experts to find out…

Upendra Namburi, CEO, Ideaearth (former chief innovation officer and marketing officer, Bharti AXA General Insurance)

This is a game of user interface and user adoption. The first step is, they’ve got the scale and the penetration. The second step that helps in the adoption of any new product or service is that the consumer is aligned to the user interface – it is part of their behaviour and psyche. The third is a network effect, the chance of the other consumer having a WhatsApp account is phenomenally high.

When it comes to person-to-person payments, WhatsApp certainly has an edge. The ability to integrate it with a communication interface makes it convenient. Suppose I’m chatting with my friend and he reminds me that I owe him some money for coffee.

With WhatsApp Payments, I can pay him within the same chat. I don’t need to go anywhere else to finish the transaction. That’s what is called ‘embedded’ technologies and these are becoming popular in today’s times.

Payments on WhatsApp will be deeply embedded in the conversation. You have to understand that a lot of commerce is also moving to WhatsApp. Many businesses have started using WhatsApp for notifications and customer service, so consumers are already aligned to interacting with businesses on WhatsApp. They even prefer using it because the communication and payment will happen in the same window.

WhatsApp is strategically embedded in a customer’s life. They’re a part of human-to-human interactions as well as conversations with businesses. Conversational commerce is going to be the future. So in the context of these conversations, from a consumer and brand perspective, WhatsApp Payments is poised beautifully.

Before UPI came in, the only way someone could do a transaction online was by logging in to their netbanking and doing a NEFT transaction. Then came wallets, apps like PhonePe and Google Pay, which are sitting on UPI’s framework. They shifted the consumer mindsets to make payments on the mobile, safely.

UPI, as a framework, has made it very eloquent for even small payments and now, consumers use UPI-based apps even more frequently than they use bank account-based apps. The basic inertia is going to be linking the UPI account with the bank account, but beyond that, adoption won’t be an issue.

Mahesh Uppal, telecommunications consultant, and owner, ComFirst (a telecom consulting firm)

WhatsApp Payments are going to significantly stir up the market in India. WhatsApp has about 400 million customers in India. The WhatsApp platform has a huge advantage because of the popularity of its messaging apps, which a brand like, say, PhonePe, lacks.

Most transactions involve some level of messaging, and both buyers and sellers can benefit from this kind of convenient money transfer. The end-to-end encryption option on WhatsApp will deliver higher privacy.

However, despite the advantage, Whatsapp is a late entrant will have to figure out how to gain market share in the payments space.

People will understandably have a level of inhibition in using UPI versus using time-tested methods of money transfer, and for that matter, time-tested methods of messaging too. Before WhatsApp came on to the scene, we were all using SMSes. But now, messaging takes place increasingly on WhatsApp and traditional with SMSes limited to transactional messaging (like banking OTPs).

The level of comfort with mobile payments is growing, thanks to the existing players, who have helped develop the market. Customers are wary of giving away banking details, but they also want flexibility and convenience. The alternative is to pay with cash, which is not always viable.

K Vaitheeswaran, e-commerce consultant and founder of Again Drinks and Indiaplaza, India's first e-commerce website

What happened over the past few years, with the advent of social media, is that it has brought about the advent of social shopping. That’s when the three pillars of consumer Internet - content, community and commerce came about. Social media platforms like Facebook have tremendous potential to change people’s behaviours.

WhatsApp is a part of Facebook, and content and community have brought it to where it is – with a very good integration between content and commerce. The convenience angle of WhatsApp for content and community has been remarkable in the last few years. The difference between WhatsApp and all other social media sites is that it is truly always on. We check the app at least 10-20 times a day.

Businesses are also using WhatsApp for communicating with consumers and that will accelerate adoption. For Paytm, the main trigger for its adoption was demonetisation of currency notes in 2016. When there wasn’t enough notes in circulation, it became more convenient to use the service, especially for small transactions.

The second trigger for adoption was the creation of UPI. People tend to trust a service run by the government. Since WhatsApp Payments also uses UPI, it will accelerate adoption among consumers.