Earlier this week, my colleague introduced me to the beta-version of WhatsApp’s payments feature within India’s most used messaging app. He sent me a link and the set up took all of two minutes to be ready to transact. No PAN card copy or address proof required. I just had to remember a banking PIN number that I often use these days to make online payments and that’s it. I was ready to go.
No sooner, however, I realised that I couldn’t test it out immediately. The beta-version, though already in use by over 5 million folks, was still not connected to utilities and establishments to whom I could pay bills. It doesn’t have the regulatory sanction for that yet even though WhatsApp linked to my bank account to draw or deposit cash. Even as I was wondering whom I would do the first transaction with, my benevolent colleague sent me Rs 10 to show me how it works. I returned it promptly, asking him to add more zeroes the next time.
I use several payment apps – Paytm, PhonePe, BHIM and all are connected to the same bank account but the ease of WhatsApp payments is befuddling to someone who can be considered a serial account holder. I hate saving bank accounts – as a kid I had to deposit every rupee my uncles gave me in those bottomless pits. You had to smile and cajole the clerk to update your passbook even though you could literally just about buy peanuts with the interest you got. I now realise the savings bank account is perhaps the single largest contributor to India's low yielding investment habit.
Later, despite the cumbersome paperwork involved and lack of other options, I racked up fourteen savings accounts in eight banks, having opened the newer accounts when I found the previous banks’ customer service was not upto the mark. (I closed two accounts this year because my chartered accountant wanted interest certificates and the banks wouldn’t send it to me by email. Well, I couldn’t get to anybody on the phone to ask for it in the first place.)
Later in the week, I met a CEO of a large media company and asked her if she would use WhatsApp payment service? Wouldn’t she be afraid of inviting strangers to her WhatsApp list of contacts when she made the first payment? She told me that WhatsApp is her lifeline – her yoga teacher is on it, so is her cook and so many others whose services she uses. She said privacy is not a concern as most other payments are traceable to the mobile number or some identity already. So much for privacy.
Now, WhatsApp has 200 million users and growing. It is available on many feature phones too and has an interface users are already familiar with. You enter an amount and write a little message like you do when you send a picture and that’s it. In its beta stage there are yet no distracting cash back offers or enticing schemes but that how payments platforms will be in the long run – a simple cash barter. Paytm put out advertisements in newspapers thanking the Prime Minister Narendra Modi for demonetisation but WhatsApp may well redefine the entire payment infrastructure in the country. No small wonder, Paytm’s in-you-face founder Vijay Shekhar Sharma called Facebook, WhatsApp's owner, one of the most evil companies in the world.
WhatsApp has made it clear that wants to be just a conduit for payments and has no aspirations to be anything more than that. Meanwhile, Google has also launched its own payment network Tez, on a similar premise but unlike WhatsApp it requires users to download an additional app. Both will have their data servers in India and adhere to the two-step authentication required for payments as mandated by the banking regulator Reserve Bank of India (RBI).
WhatsApp’s payment feature, being connected to the governments Unified Payments Interface developed by National Payments Corporation of India for facilitating instant inter-bank transactions, uses the same interface its competitors in the business do and has to pay no rent. Therefore, WhatsApp charges nothing from its users for using the payments feature. It had literally no startup costs as it is using its existing messaging infrastructure for transacting. In fact, it didn’t even feel the need to set up a separate office or team for the new feature, as it considered the intimation to pay or receive monies just another message. Somebody intervened saying that it can launch its services formally only if has a physical presence and a point person to address letters to in case of a problem. WhatsApp is complying with that request now but a formal date is anyone's guess as some smart brain discovered that the 'forwards' within the messaging service is a social menace.
Dumbing down payments is going to affect a lot of people – for sure startups like Paytm, PhonePe and a whole of bunch of companies that grew around that simple transaction. It will even put to question the strategy behind Jio Pay, Mukesh Ambani's still unexploited venture. Till now, the central premise of payment focused companies were their technology back end that bought together new businesses and customers who wanted a simpler payment system. For example, you could pay Uber more easily with Paytm.
But, when that platform become ubiquitous and generic, with folks like WhatsApp and Tez, startups with “payment” fixations will surely be extinct. There will be entities which hold your money and technology payment services who will act like a your debit card in-built into the mobile. Apart from instant gratification from valuations, it is now becoming amply clear there can be no business model around mere payments unless you own the underlying transaction that first caused the payment. For Facebook, payments makes WhatsApp more sticky and like its core business, it will gain from knowing its users more.
Early indications came from three aspirants Tech Mahindra, Cholamandalam Finance and Dilip Shanghvi-IDFC Bank-Telenor JV, who returned their hard earned payment bank approvals to the RBI but there were others who had the tiger by the tail have burnt big sums of money to promote payments. Paytm has started a mutual fund distribution service, wants customers to open savings accounts with them and has quietly started their climb towards the holy grail in the finance world – being a bank. The last thing I want is my chartered accountant asking for a Paytm account interest certificate. So uncool.