WhatsApp Payments Controversy in India

I mentioned WhatsApp Business in passing while writing about Paytm in my first ever attempt to write about India’s tech ecosystem. My analysis was short-sighted in so far that my understanding of India’s payment landscape was limited. To put in another way I wasn’t aware of UPI. UPI stands for Unified Payment Interface. It’s a payment protocol specifically designed for India to make peer-peer money transfer as easy as sending an email. Almost all banks in India comply with it. Which means regardless of the bank you maintain an account with, you will have a unique UPI ID just like an email address. You can use this UPI ID only to send/receive money to/from whomever you want.

The benefits of such a level playing field for startups, looking to venture into payments, are enormous. From The Ken (paywall):

Startups would need to go through the software development kits (SDKs), made by banks, that acted as ‘wrappers’ on top of UPI’s core technology (APIs). Only banks would be allowed to directly access UPI’s APIs directly, so startups would need to find a bank willing to license it an SDK.

It was a payment system created specifically for India by the National Payments Corporation of India (which manages various payment standards in the country). It was imagined to be a payment system that works just like sending an email, complete with the person having a unique address. It is the closest thing to a one-size-fits-all payment solution as it can be used for peer-to-peer payments, peer-to-merchant payments, both online and offline. Its one limitation is that it can be used only through a smartphone.

The first company to adopt UPI was PhonePe. PhonePe is now owned by Flipkart. To make UPI more mainstream Indian government has its own implementation of the protocol called BHIM. Google came up with their own i.e. Google Tez last year. And then there is Paytm. WhatsApp’s entry is recent albeit most controversial one. The reasons are:

1. There is no username and password. If you can access your WhatsApp you can send and receive money. The reason behind this is WhatsApp, unlike other players, is not operating as a wallet. They are letting ICICI, their partner bank, take care of this.

2. Barcode implementation is missing which is a requirement for any UPI implementation.

3. You can’t send money to someone who is not using WhatsApp if you have an iPhone. You can do it on Android but the option is hidden deep in settings.

One person is particularly unhappy about this.

He is more unhappy then what’s apparent from his tweet. Listen to his interview with Bloomberg for a glimpse.

In WhatsApp defense, the Payments feature is still in beta—only available to selected 1M users of its massive 270M base. And NPCI (governing body controlling UPI) has clarified that WhatsApp will have to meet full requirements for their eventual public launch. With that said I don’t think Vijay is pissed off for some arbitrary reasons. He understands what WhatsApp is trying to do here. With all the goodness that comes with an open platform like UPI, there also comes a less so ideal customer experience. First, you have to download an app i.e. Paytm, Tez, PhonePe etc. On top of that, you need username/password and enter verification pins etc for the individual transactions.

Now imagine an app that you already use the most in your daily life. There is no username/password to it. And you don’t have to enter obscure UPI IDs and confirmation codes while you are sending money. A caveat here is that WhatsApp only lets you use Payments feature if your mobile number is same with both the bank and WhatsApp. This and by maintaining a closed garden approach for now (payments only between WhatsApp users on iPhone), WhatsApp is showing how seamless sending money can be. To the surprise of no one people are raving about it on social media.

It will be interesting to see how they manage to maintain the same user experience for someone who wants to send money to a person not using WhatsApp. Or maybe they don’t have to. They need to be interoperable with other players to comply with the regulations. But there is no regulation for an equal user experience. What Paytm, PhonePe and other have been able to do is phenomenal. To use them, however, requires a certain level of tech savviness. The same is not true for WhatsApp. Your grandma can send and receive money if you help her set it up for once. And that might be instrumental in doubling down on an already powerful network effect of 270M people.

Vijay Shekhar is right in saying that Facebook is bending the rules. But they are not breaking them. And that’s an important difference.