In mid-2021, Netflix took an major step towards growing its penetration in India by embracing support for Unified Payment Interface (UPI) – allowing consumers to subscribe to its video platform for the first time without a credit or debit card.
Given the relatively low penetration of bank cards in India, the acknowledgement of financial mechanisms happening outside of the USA vastly broadened Netflix’s reach. Almost exactly a year later, Netflix has cast its diversified payment net even further, across the entire Asia-Pacific region – not only expanding support for UPI but also adding digital wallets and carrier billing options too.
Considering that an estimated 72% of e-commerce transactions in APAC will be made using digital wallets by 2025, according to The Global Payments Report, the move could have a significant uptick effect on Netflix’s subscriber numbers, at a time when the company is being scrutinized for approaching saturation point. However, low ARPUs in parts of APAC may limit the impact on the bottom line.
So, what is UPI and why is the payment method so widely used across APAC since its introduction in 2016?
With mobile-first video being a staple streaming trend in India and parts of south east Asia in particular, it is logical to embrace a dedicated smartphone application that enables transfers between bank accounts. Developed by the National Payments Corporation of India (NPCI), UPI can make real-time payments via a 2FA (two factor authentication) process, without users having to enter bank account details or other personal information every time a transaction is made.
Announcing the expansive localized payment plans in a blog post, Netflix’s director of payments for Asia-Pacific, Shalini Khatwani, claimed that new sign-ups through alternative payment methods tripled on the streaming service from 2020 to 2021, then doubled from 2021 to 2022. In this two-year period, Netflix has added 16 new payment partners.
In India, many credit and debit cards are not enabled for recurring payments, while certain banks in south east Asia require clients to opt-in for online payments – adding another friction point in the monthly subscription model. By the same token, a primary barrier to entry for monthly subscription-based businesses like Netflix has been the absence of mandates within UPI, which enable pre-approved transactions in a similar way to credit cards, with the interface regulated by the Reserve Bank of India.
This is no longer an issue for UPI, digital wallets, and carrier billing payment methods, which means Netflix and consumers alike can leapfrog frustrating additional steps found with traditional bank card approval processes. Khatwani notes that there is strong demand for carrier billing in more mature markets such as South Korea and Taiwan, where card payments remain the norm.
While Netflix claims to be the first merchant to launch UPI autopay in India, WhatsApp was three years ahead of Netflix in trialing UPI, doing so in 2018 when the Meta-owned messaging application was given permission to test its service in the Indian market.
WhatsApp’s heavy usage and strong brand recognition in the region – like Netflix – was viewed as a powerful advantage in driving a money service to scale in a country of 1.4bn people. During the trial phase, WhatsApp was limited to a user base of one million, and to small transactions.
For smartphone-centric services like WhatsApp, Facebook, and Netflix, mobile payment services are a way to become ingrained in daily life.
In late 2017, Facebook announced plans to take Messenger payments to new markets. Long before this, the social media giant entered the mobile payments field in 2014, when the sector was a hotbed of competition between web companies, and between operators and OTT providers.
Since then, much of the gloss has come off m-payments. They may be a way of life, thanks to NFC and ubiquitous use of smartphones, but monetizing them has proved challenging in developed markets, especially for MNOs.
“It’s not a one-size-fits-all approach though,” warns Khatwani. “At Netflix, we meticulously A/B test any new payment method prior to roll out and launch to make sure this is truly something our customers want and is delivering incremental value.”