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Why WhatsApp's entrance into India's payments space has terrified Paytm

If WhatsApp's entry into digital payments in India is anything like WeChat's in China with its hyper-active user base driving payment activity, Paytm has a fight on its hands.

As soon as WhatsApp in India announced a beta launch of a payments service recently, it caused a fusillade of Twitter-based accusations against the Facebook company from Vijay Sharma, the CEO of Paytm, India's largest and most dominant payments service with 68 percent of the market.

He then told the Economic Times that "Facebook is openly colonising our payment system and is customising UPI to their benefit. UPI was built as an India Stack, now some American monopoly arm-twists UPI for customer implementation". The UPI that Sharma is referring to is the Unified Payments Interface (UPI) architected by the government body National Payments Corporation of India in order to ensure secure and stable payments online.

Sharma's basic contention is that WhatsApp, while customising its interface for payments made via UPI, has made the process insecure by eliminating the need for a login. His second grouse is that WhatsApp's platform blocks access to other UPI-based payment platforms. (Apparently interoperability is a necessary feature of any payments service.)

In order to really get to the nub of Sharma's fulminating you only have to analyse what happened with the payments sphere in neighbour China over the past decade. Ecommerce goliath Alibaba started Alipay in 2009 and quickly established an 80 percent market share. At the time, gaming company Tencent started what is today the largest social media app in the world, Tenpay -- or WeChat Pay outside China -- which I referred to here some time ago.

While WeChat was adding users by the tens of millions every month, parent Tencent launched Tenpay to help their users pay for all manner of things that they had begun to consume, from haircuts to taxis to online purchases. It was less a rival for Alipay than it was a convenient service for WeChat customers. By 2015, WeChat had quickly scarfed up 20 percent of the payments market share, reducing Alipay to 68 percent. By early 2017, according to research firm Analysys, the erstwhile giant was down to 54 percent while WeChat commanded close to 40 percent of the market. WeChat's growing dominance in this sphere is simply because it has a staggeringly large captive base of users who don't need to step out of their ecosystem to pay for anything.

This is what is probably giving Sharma sleepless nights. Paytm may be the dominant payments system today in a nascent industry, valued at a mighty $10 billion with 300 million users in its kitty, it says. But WhatsApp has 230 million very active and very dedicated users on its own dedicated, heavily trafficked platform who will not think twice about using a WhatsApp dedicated payments system a click away. As it stands, WhatsApp has become a de facto ecommerce gateway for people selling everything from cars to goats during the holy festival of Eid. And considering India is in its digital infancy, that number is only going to grow. Paytm doesn't have any of this to lure current or future customers.

Of course, Paytm is still the formidable giant to beat and has a virtual lock in the offline payments space -- an area that WeChat had to make huge headway in to catch up to Alipay, as this Tech in Asia article states. After all, the vast majority of Indians are yet to discover the internet and offline is where the majority of the action is today and will be for some time. WeChat also has to contend with Google's Tez payments service, which launched last year, and other smaller rivals such as Mobikwik and Freecharge. With Paytm, the empire can continue to outspend and outgrow its competitors easily, especially with Alibaba as its chief backer. With new partnerships and deal-making a sure thing in the years to come, Paytm is going nowhere but up.

For now though, my money is on WhatsApp quickly becoming the go-to service for anyone who has a smartphone and is used to messaging -- which is some 350 million-plus people in India and growing at an exponential rate.

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