As in other parts of the digital mobile economy, there has always been debate over whether handset-based money services would end up being dominated by MNOs or Internet players.
MNOs hoped that the rise of NFC contactless payments would give them the upper hand, because NFC was initially deployed in smartphones with the SIM card – until Google spoiled that dream by supporting Host Card Emulation, which authenticates NFC payments in the cloud.
However, MNOs have remained strong in developing economies, where mobile payments systems like Vodafone’s M-Pesa are often based on SMS. M-Pesa is the world’s most used mobile money service and is offered in several African countries and in India. Now that market may be under siege from the Internet players too, with WhatsApp testing a money transfer system in India, and its parent Facebook planning to extend its Messenger-based m-payments service beyond the US this year.
WhatsApp has been granted permission to test its service in the Indian market, where there are several mobile money offerings, but limited penetration. The heavy usage, and brand recognition, that WhatsApp enjoys in India could be a powerful advantage in driving a money service to scale in this huge country.
The National Payments Corporation of India (NPCI) is to power the WhatsApp beta launch, which will be trialled with four banks. This will be coordinated by an upcoming platform, the multi-bank Unified Payments Interface model, and a fully featured product will be released after the beta test. During the trial phase, WhatsApp will be limited to a user base of one million, and to small transactions.
Samsung and Apple already offer mobile payments in India, but only on their own smartphones, and in Samsung’s case, only on higher end models. Then there is M-Pesa and a couple of other mobile operator options. But WhatsApp – like Google or PayPal – has the ability to move beyond the boundaries of device brand or operator network. It also has the advantage of recognized security in its messaging platform (some governments are attempting to force the firm to weaken its encryption algorithms).
For both Facebook and WhatsApp, a payments service would be a way to make their apps even more central to users’ daily lives, and group payments would be particularly logical for these social applications – a next step for anyone using the services to organize events, for instance.
Late last year, Facebook announced plans to take Messenger payments to new markets. 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 over-the-top 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.
“In the US, most people use payments in Messenger to send less than $50 at a time,” David Marcus, head of Messenger, said in a statement. Facebook does not charge for the capability, but sees it as one of many ways to make its user experience, especially its social network and messaging apps, indispensable to consumers in all their daily activities – driving advertising and other revenues, and keeping them off rival platforms like Google.
Apple has similar plans – its forthcoming Apple Pay Cash will let users send money to friends through the iMessage service. Other options in the US include Square’s Square Cash and PayPal’s Venmo, but in other markets, these services are not available. In Europe, it is more common to use smartphone contactless apps such as Apple Pay and Android Pay, so Facebook will be hoping to spark a change of habit and a migration to messaging-based offerings.
“Convenience levels and near real-time payment transfers remove historical pain points with alternative P2P payment methods, including checks,” said Phil Sealy, principal analyst at ABI Research. “Although predominately used in social settings, to split bills or pay friends and family, there is significant opportunity for P2P to move beyond the social realms, possibly used as a future alternative platform to pay household bills.”
The bigger target for Facebook, in which WhatsApp will be a significant asset, will be emerging economies, where it can build market share more easily at the expense of Google, on the back of its own services, and deals with regional carriers such as Millicom. “Facebook wants to become a utility in the developing world, and remittances are a gateway drug to financial inclusion,” said a source who spoke to the Financial Times.
However, as Google well knows, a large customer base and the basic elements do not add up to guaranteed success. The search giant had limited impact with its NFC-driven Wallet when that launched, and Google Money never managed to worry PayPal.