WhatsApp Pay UPI is now live while Google Pay, PhonePe have already got the first sting

• WhatsApp finally received the approval to operate UPI payments from the National Payments Council of India.
• WhatsApp’s payments feature has been rolled out in ten Indian regional language versions of WhatsApp.
• WhatsApp Pay’s entry in payments also comes with a major blow to two of its biggest competitors – Google Pay and PhonePe as NPCI has doled out a 30% cap for third party payment operators.
• Amidst all of this, a beneficiary from WhatsApp Pay’s entry would be Mukesh Ambani’s JioMart.

After a long wait, WhatsApp finally received the approval to operate the Unified Payments Interface (UPI) payments from the National Payments Council of India (NPCI). With this, WhatsApp Pay is set to roll out initially with a cap of 20 million users, to make payments ‘as easy as sending a message’.

A day after securing the approval, WhatsApp is launching the payments feature in ten Indian regional languages. WhatsApp’s UPI entry begins with a partnership with five banks – ICICI Bank, HDFC Bank, Axis Bank, the State Bank of India, and Jio Payments Bank.

“With UPI, India has created something truly special and is opening up a world of opportunities for micro and small businesses that are the backbone of the Indian economy. India is the first country to do anything like this. I’m glad we were able to support this effort and work together to help achieve a more digital India,” said Facebook CEO Mark Zuckerberg in a statement.

But WhatsApp Pay’s entry in payments that was touted to be a death card for many others has been accompanied by a major blow to two of its biggest competitors – Google Pay and Walmart-owned PhonePe.

NPCI setback for Google Pay, Phone Pe

According to the NPCI’s official statement, UPI transactions on third party payment apps cannot exceed 30% of the overall volume of transactions processed in UPI during the preceding three months.

Both Google Pay and PhonePe which are third-party apps will be hit as they currently together hold 40% market share in the UPI segment which has recently crossed the 2 billion transaction count.


" Digital payments in India is still in its infancy and any interventions at this point should be made with a view to accelerate consumer choice and innovation. A choice based and open model is key to drive this momentum. This announcement has come as a surprise and has implications for hundreds of millions of users who use UPI for their daily payments and could impact the further adoption of UPI and the end goal of financial inclusion," said Sajith Sivanandan, Business Head, Google Pay and Next Billion User initiatives, India on the NPCI cap issue.

UPI transactions on PhonePe and Google Pay in October 2020
Source: media reports

While the cap will be effective from January 1, 2021, existing third party operators like Google Pay and PhonePe have been given until 2022 to comply with the new rules.

UPI’s growth in India and its interoperability has left behind other players who focussed on mobile payments alone. “PPI’s (pre-paid instruments like mobile wallets) which were once expected to scale up rapidly in the retail digital payments industry have clearly not achieved the success that they were expected to achieve. While there could be several explanations for this, one of the main reasons we believe is due to strong competition from UPI,” said a report by JM Financial from September 2020.

However, players like Paytm which isn’t a big shareholder in UPI, won’t be affected by the new capping as it is a PSP (Payment service provider).

WhatsApp Pay’s potential

India is the first country where Facebook had begun its tryst with payments back in 2018 when WhatsApp began beta testing payments in the country. Since then, the company had met with several regulatory hurdles relating to data localisation, which was followed by a promise of storing data locally and WhatsApp Pay submitting revised data localization compliance this year.

However, even while it hadn’t officially rolled out, experts have been betting on its popularity because of its existing 400 million user base in India. Analysts at Bernstein (from a June 2020 report) expected WhatsApp Pay’s penetration to increase to 30% (from the current 10%) by FY25.

Abhijit Bose, WhatsApp India head, had also shared plans for the company’s foray into financial services in India in July 2020. WhatsApp will soon be driving its financial inclusion push in India with its foray into lending, micro-insurance, and micro-pension products. 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 then.

JioMart – the silent winner

Amidst all of this, a beneficiary from WhatsApp Pay’s entry would be India’s richest man’s e-commerce bet – Mukesh Ambani’s JioMart. “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.

WhatsApp Pay’s UPI approval and potential tie-up with JioMart after Facebook pumped $5.7 billion in Reliance earlier this year, will see JioMart gain by offering easy ordering and payment facility to its users through WhatsApp. “RIL’s foray into the space leveraging its large offline distribution capabilities, and integration of ability to order groceries through WhatsApp, a platform with >400 mn MAUs in India,” said a Goldman Sachs report.

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