After unsuccessfully trying to replicate the success of its messaging service in the payments space, WhatsApp Pay is changing tack. It is now banking on the person-to-merchant (P2M) route, instead of person-to-person (P2P), to drive the usage of its UPI (unified payments interface) service, analysts said.
To achieve this, the company recently introduced an in-chat payment feature for consumers to pay businesses using any UPI app.
Analysts, however, believe while this could enable an increase in transactions via WhatsApp Pay, the feature would benefit its competitors like PhonePe and Google Pay more because of their huge penetration.
The major reason for WhatsApp Pay not being able to make a mark is the nature of its brand appeal. The platform is seen more as a messaging app than a payments one. Since payment apps have a user interface designed around payments, consumers are able to relate with them better when it comes to making UPI transactions.
“I feel pretty optimistic about WhatsApp Pay as it is all about building an experience,” Sandhya Devanathan, head and vice president of Meta India, the parent firm of WhatsApp, told FE in a recent interaction.
WhatsApp first introduced its UPI-based payments service in India in 2020 as a pilot, which was later expanded to 100 million users. However, one of the reasons for WhatsApp Pay not getting much traction was that the company did not invest much in popularising its UPI solution even as its competitors were offering cashbacks and other offers.
According to the National Payments Corporation of India (NPCI), WhatsApp Pay’s market share in August was around around 0.2% in terms of volume of UPI transactions, compared to PhonePe’s 46.6%, Google Pay’s 35.2%, and Paytm’s 14%.
WhatsApp Pay processed 19.7 million UPI transactions worth Rs 1,677.5 crore. This is significantly smaller than market leader PhonePe’s 5 billion transactions worth Rs 7.75 trillion. The second most used app for UPI was Google Pay, which processed 3.8 billion transactions worth Rs 5.4 trillion. Paytm processed 1.5 billion UPI transactions worth Rs 1.8 trillion.
“WhatsApp Pay is well behind the curve as far as adoption is concerned both from a merchant perspective as well as a buyer perspective,” said Sunil Rongala, senior vice president, head – strategy, innovation & analytics at Worldline India. “It is really going to be difficult for WhatsApp to get to anywhere close to the established players. It is still predominantly viewed as a messaging platform, albeit with a deep penetration, and less as a payments app,” Rongala said.
A key advantage WhatsApp had when it launched its UPI service was its huge active subscriber base in India, which is close to 600 million now. The company did face a regulatory cap from NPCI with regard to onboarding of users because of the apprehension that it could dominate the market.
“WhatsApp Pay was a late entrant in the market. Google Pay and PhonePe had hooked users by then by giving them cashbacks and rewards,” said Mihir Gandhi, partner-payments transformation at PwC India.
According to Gandhi, higher transaction failures on WhatsApp in the initial days, poor user experience and absence of cashbacks were some of the other factors which probably worked against it.
With the change in focus to P2M transactions, WhatsApp can still tap a huge market, as the overall market opportunity for UPI transactions in this space is huge. According to Worldline, P2M transaction volume grew from 13.33 billion to 29.15 billion during the January-June period, a 119% increase year-on-year, while transaction value grew 72% from Rs 11.6 trillion to Rs 19.18 trillion.
Similarly, with more businesses joining WhatsApp to interact with consumers, the transaction value and volume are expected to increase, benefiting all UPI players including WhatsApp Pay, analysts said.
In comparison, P2P (person-to-person) transactions rose 22% y-o-y to Rs 22.8 billion in June from 18.62 billion. During the same period, the value of P2P transactions grew 41% to Rs 64 trillion from Rs 45.5 trillion, according to Worldline data.
Analysts said that there is a huge opportunity in the digital payment space, but it’s not easy to displace consumer stickiness with a particular payment app.
