Social media giant Facebook has made the first tentative steps towards the digital payment environment with its WhatsApp messaging platform in Brazil.
When Facebook acquired WhatsApp in 2014 for a monstrous $19 billion eyebrows were certainly raised. Not only was this a contraction in the growing OTT segment, which some critics still question today, but others wondered how Mark Zuckerberg and his cronies were ever going to achieve return on investment (ROI) for a platform which hadn’t made any money.
While some of the efforts to commercialise the messaging service have been quashed, privacy concerns blocked merging WhatsApp datasets with the core Facebook platform, there have been some successes. Businesses pay to respond to customer messages after a 24-hour period and there are advertising products in play, but the promise of WhatsApp over the last few years has been in digital payments.
“Today we’re starting to launch payments for people using WhatsApp in Brazil,” Facebook CEO Mark Zuckerberg said. “We’re making sending and receiving money as easy as sharing photos. We’re also enabling small businesses to make sales right within WhatsApp.”
The details of this digital payments model will become clearer as the days turn into weeks and months, but this is a very useful route for the team to take. Firstly, digital payments are becoming increasingly popular in all markets around the world, and secondly, this is a business model which has incredible potential in the regions which lack ubiquitous, traditional banking infrastructure.
According to Mckinsey, 77% of people used one or more types of mobile payments in 2019, with 91% of millennials, 80% of Generation X and 64% of Baby Boomers making use of the technology. This is not a fad and a clear indication of where society is heading as the influence of convenience takes hold.
Looking at the leading technologies in the marketplace, the most popular method of digital payments in-app is PayPal (58%), in-store is ApplePay (40%), online is PayPal (41%) and PayPal also takes the crown for peer-to-peer payments (72%).
The consumer is embracing the digital payments shift, though the technologies in play are largely popular because they are there. In these embryonic days, there is an opportunity to innovate and steal market share.
The second element of this equation worth considering is the potential for digital payments the developing markets, where traditional banking infrastructure is not ubiquitous. M-Pesa in Africa has demonstrated that in this void a digital alternative reliant on telecoms infrastructure can thrive and empower business.
And aside from these supporting trends, perhaps one of the most encouraging elements of this story is the install base. WhatsApp has more than 2 billion users already. Most new ideas struggle because they don’t have a userbase to engage, they have to convince the consumer to download or purchase an application. WhatsApp already has an engaged userbase, it is a case of pushing new functionality out; it is a completely different dynamic.
Ultimately this is an idea which leans on then the success of WeChat. What started off as a Chinese messaging service has evolved to become a social media platform, digital payments app and entertainment ecosystem. If Facebook could replicate even a fraction of the WeChat success in WhatsApp, the team could be onto a winner.
What is worth noting is this could be deemed a trial run for the technology, an opportunity to iron out the creases before launching into a more lucrative space. Let’s not forget, Facebook has recently purchased a 9.9% stake in Jio Platforms, the disruptive force democratising connectivity in India, and has already promised to deliver a digital payments platform for Indian SMEs.