WhatsApp joins the digital payment sector


Since its debut in 2007, Safaricom’s M-Pesa has continued to enjoy dominance in Kenya as Airtel Money and the rest play second fiddle. Even around the world, the mobile money platform is known for starting a new era for the African continent that saw it leapfrog the age of plastic money straight into mobile money services. 

Over the years, other digital payment services have come up such as mobile wallets. For instance, companies like Apple and Google have their own mobile wallets that allow their users to receive money, store it and even pay utilities with it. New to join the list of big corporations investing in the sector has been Facebook, which has introduced its own digital payment service, through its recently acquired subsidiary, WhatsApp, dubbed WhatsApp Pay.

The UPI-based payments service will allow users to transfer funds within the widely used application. Since 2018, the service has been in a beta run in India where it was established. However, due to regulatory challenges with the authorities it has never been fully rolled out until mid-last month when it was in Brazil.

This was due to the fact that a large number of the population in the country already heavily relied on the platform to interact with their local businesses in terms of asking their operating hours or questions regarding their products before they make a decision. In fact, the country boasts one of the largest WhatsApp user base. According to Statista, Brazil is second only to India, boasting 120 million WhatsApp users.  

The company believes that Brazil’s 10 million small and micro businesses are its heartbeat. It has become second nature to send a zap to a business to get questions answered. Now in addition to viewing a store’s catalogue, customers will also be able to send payments for products as well.

WhatsApp pay will allow users to send money between themselves, customer to customer, free of charge as compared to most other services which charge an additional fee. However, when it comes to businesses, Facebook has stated it will charge them a processing fee in order to receive payments through WhatsApp. The social media giant has placed a 3.99% fee, which is charged on the value of the payment. 

After acquiring WhatsApp in 2014, Facebook looked for ways to monetize the platform apart from the annual subscription fee it had been charging. The company thought of introducing advertisements but due to its expansion they decided to drop the idea. In 2016, with the platform still growing, the company took another step to cease its annual subscription fee thus leaving it without any clear source of revenue from the platform. In order to justify its acquisition of the platform, the company will use the processing fee as its revenue stream. This way, the company will be able to monetize the platform without the need for ads that people nowadays try to avoid as much as possible. 

In order for one to start using the payment system, they will have to open the chat screen of whomever they want to exchange the fund with then tap on the attachment icon. After that, they will choose payments and follow the on-screen steps. Once this is done, one will be able to send money as long as the one they send to has also set up. Additionally, one will have to link their account with Visa or MasterCard plastic cards. The company has also partnered with local payment processors in Brazil such as Cielo and other local organizations such as Banco do Brasil and Nubank. 

To promote security, users will be required to use fingerprints or create a six-digit pin to ensure there is no breach. The WhatsApp Payments will also be enabled by Facebook Pay and thus in the future, the company wants to make it possible to use the same card information across Facebook’s family of apps.

With its rising users, WhatsApp Pay will be a good revenue stream if it succeeds in Brazil and is launched worldwide. Many believe it will bring competition for M-Pesa however; on the contrary, it might integrate with dominant mobile money platform as it has done with the likes of Cielo in Brazil. But before we reach to that stage, we must observe its usage in Brazil as only time will tell if it is the next big innovation.  

Writer is a member of NBM’s inhouse editorial team and lead business researcher

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