WhatsApp is starting lending and insurance with a number of users that Paytm, PhonePe and Amazon took years to build

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  • WhatsApp is driving its financial inclusion push in India as it has announced its foray into lending, micro-insurance, and micro-pension products.
  • The financial services plans could give the instant messaging app over 200 million new users, adding to its existing 400 million user base in India.
  • But with the move, WhatsApp becomes a direct competitor to the existing players in India – Paytm (backed by Alibaba and SoftBank), PhonePe (backed by Walmart) as well as Amazon Pay.
At a time when digital payments are on the rise, given the pandemic enforced lockdown, the future for 'Digital India' looks bright and companies are looking for gateways to cash in on this. Facebook owned messaging app, WhatsApp is the latest entrant - driving its financial inclusion push in India with its foray into lending, micro-insurance, and micro-pension products. Abhijit Bose, WhatsApp India head, shared the plans for the company’s foray into financial services in India at the Global Fintech Festival.

Bose added that WhatsApp is already in talks with the likes of ICICI Bank, Kotak Mahindra and HDFC to explore its financial services foray in India. WhatsApp is currently running pilot programs for the same. “Based on the results, we will co-invest and scale. Even a small conversion of the demand will translate into an infusion of significant savings into the financial system,” said Bose.

With the move, WhatsApp becomes a direct competitor to the existing players in India – Paytm (backed by Alibaba and SoftBank), PhonePe (backed by Walmart) as well as Amazon. Paytm has recently announced its insurance foray and also acquired Raheja QBE General Insurance, PhonePe has a partnership with ICICI Lombard to offer insurance products, Amazon Pay has just announced its insurance foray in partnership with digital insurance startup Acko.

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WhatsApp’s payments entry is with 400 million users

WhatsApp already has a competitive advantage over the other players in the ecosystem as it comes with an existing 400 million user base. Moreover, WhatsApp’s partnership with Reliance Jio will only power its growth.

India is one of the biggest markets for WhatsApp and the app is only looking at increasing its reach in the country. WhatsApp’s financial plans outlined for the next 18 months, have the capability of giving the instant messaging app an additional 200 million new users.

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But this could threaten the players who have been around for longer and have been steadily building their players.

11-year old Paytm’s parent company One97 communications has over 700-800 million users overall, a source had told Business Insider. Meanwhile, five-year old PhonePe claims to have 200 million registered users. Amazon’s user data is not publicly available.

WhatsApp Pay has been in the testing mode in India since 2018, and has been caught up with regulatory hurdles. But it's bank of already existing users (through WhatsApp), will make it easier for it to conquer the market. According to Bernstein’s hypothesis, WhatsApp has already garnered 10.7% of the market in the first phase of rollout since the approval came in February. The subsequent phases will be much bigger and a lot more competitive.

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Analysts at Bernstein expect WhatsApp Pay’s penetration to increase to 30% (from the current 10%) by FY25.

“Payments remains the missing link, the tie up could be a potential game changer with WhatsApp Pay integration with JioMart,” said the report by Bernstein.

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