Explained: WhatsApp payments make a splash. What’s next?

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NEW DELHI: The UPI payment market has a new rising star -WhatsApp Pay. After years of marginal presence in the payment space, when WhatsApp was mandated to keep its userbase small, volume of transactions on the platform rose 562% in June over May, an analysis done datanarratives shows.
The meta-owned platform saw 23 million users send and receive money in June after it offered users a cashback of Rs 35 per transaction for up to 3 transactions. In May only 3.48 million transactions had taken place on WhatsApp Pay.
However, with the incentive gone in July, there was a sharp decline in number of transactions. But there was a silver lining – the value of transactions registered a 16% rise from Rs 430 crore in June to Rs 502 crore in July. The charts below show monthly volume and value of transactions on WhatsApp Pay since April 2020. Tap or hover over the lines to see month-wise data.

WhatsApp is the most used messaging platform in the country and it has its largest user base in India. The payments feature on the messaging app allows users to send and receive money with no charges.
WhatsApp enabled UPI transactions feature on its platform in 2020, but the cap was limited to 20 million users only. It was gradually increased to 40 million in November last year.
In April 2022, the National Payments Corporation of India (NPCI), which regulates UPI payments and its rules — approved an additional 60 million users, bring the total to 100 million.
Interestingly, even though the number of UPI transactions fell in July, the amount of total transactions registered a jump. WhatsApp processed transactions worth Rs 502 crore in July, 16% higher than Rs 430 crore recorded in the previous month.
Evidently a large number of small transactions were made in June to take advantage of the cashbacks. As the chart below shows that average amount per transaction went up from Rs 186 in June to Rs 813 in July.

Pandemic-powered UPI payment. End of ATMs?
UPI held over 60% volume share of total non-cash transactions in FY2021-22. An increase in the proportion of digital payments driven by UPI has created more digital data that enables robust underwriting for lending.
The UPI P2M (person to merchant) transactions emerged as the most preferred payment mode among consumers with a market share of 64% in volume and 50% in terms of value, according to the report by Worldline, a global leader in payments industry.
In Q1 2022, UPI clocked over 14.55 billion transactions in volume and Rs 26.19 lakh crore in terms of value.
The pandemic was the biggest growth driver with UPI transaction volumes growing 2.6x between April 2020 and April 2021 from 1 billion transactions to 2.6 billion transactions. The chart below shows that pre-Covid ATM withdrawals were bigger than UPI transactions. Today ATM transactions are just 20% of UPI’s.

Duopoly to triopoly?
Whatsapp holds the promise of potentially becoming a ‘super app’ given its massive penetration into the Indian market. However, in comparison to its huge user base in the country, at present, WhatsApp is a tiny player in terms of app-based payments.
Flipkart-owned PhonePe, Google Pay, and PayTM occupy a combined 95+% market share for UPI transactions.
WhatsApp has seen impressive growth, but has a long way to go before it can make significant headway.

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