IM MEETS PAYMENT

Tap to talk. Touch to text. Take pictures and videos, and share with someone thousands of miles away. Instant Messaging (IM) services such as Messenger (Facebook), WhatsApp, WeChat and Imo among a myriad of others, are becoming as ubiquitous as smartphones. Defying boundaries of age, tech literacy and other demographic segregations, IM services have become a mainstay of most frequently used apps on smartphones. They have constantly been evolving, providing users with greater variety of functionality with a wider range of features.

WeChat is one of the earliest players in this arena. Often called China’s “App for Everything”, WeChat is known for its Mini Programs that incorporate many different functions into the platform. One such feature is WeChat Pay. Users can link their Chinese bank accounts, as well as Visa, MasterCard and JCB for peer-to-peer (P2P) payments, among a host of other transactions.

The concept of IM-based payments at this point of time is focused on making payments to individuals, even though other modes of payment are available on some IM platforms. Users first link their bank account, or instruments such as debit/credit cards, to their IM account. Once two users have registered their accounts with the IM platform, they can make payments between themselves. To authenticate and confirm payments, users either enter their PIN or provide biometric verification. This bypasses the complexities of making P2P payments, where the IM service acts as an intermediary between the users’ accounts. This also allows users to instantly make payments that come up during IM conversations, instead of having to open a separate app or make the transaction later.

Facebook is also planning to roll out Messenger’s payment feature to users in selected regions. The primary modus operandi involves linking a VISA or MasterCard debit card with their Messenger account. Messenger does not currently charge the users any additional fees for making payments in this modality, and has a limit of total USD 10,000 worth of transactions in a rolling window of 30 days. Messenger is also integrating other payment modalities to enable an ecosystem where users have more choice. For example, Messenger now allows users to link their PayPal accounts, which in turn are either linked to bank accounts or credit cards. In another example of Facebook’s push into the digital payment space, it has partnered with GCash and PayMaya in the Philippines for money transfers and bills payments.

 

WhatsApp, owned by Facebook Inc, has been beta testing its payment service in India for several months now, and is expected to roll out at scale in the first quarter of 2018. WhatsApp Pay is based on India’s Unified Payments Interface (UPI), and has already brought on board three of the major banks in India – State Bank of India, ICICI Bank and HDFC Bank.

One of the greatest barriers in promoting digital financial services (DFS) is the rigidity in consumer behavior. Users adopt certain tech innovations much faster than others, implying that the onus is on service providers to design their products in a way that helps propagate intended usage among customers. This is where IM-based payments offer a simple solution.

Bangladesh is not excluded from the phenomena of widespread usage of social media apps. Bangladesh has 29 million users on Facebook, and 22 million of them are from Dhaka city: which is again, 1.1% of Facebook’s active user base (Figure 1). This phenomenon holds true for other popular IM apps as well. It has been observed that, in urban areas, 91% of smartphone owners use Messenger, 61% use WhatsApp and 43% use Viber. It is therefore much easier to integrate digital payments into these services and habituate the users with a digital modality of making payments.

From a regulatory standpoint, enabling IM-based payments should not be too challenging, since it only requires the linking of the users’ existing bank accounts, debit cards or verified mobile wallets to the respective social media platform. Think of IM-based payments as a no-frills gateway into the digital payments space: it’s a way to reduce frequency of OTC payments. And while IM-based payments do not offer the intricacies and variety of use cases of certain other DFS solutions, it embodies the simplicity and ease-of-use promised by DFS. It would be interesting to observe how the introduction of this particular use case plays out in an ecosystem where DFS proliferation has been dictated by traditional mobile money platforms.