Is Facebook, Inc. (NASDAQ: FB) Finally Ready To Monetize WhatsApp?

December 19, 2017, 12:14 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Recent news reports indicate that Facebook, Inc. (NASDAQ: FB) is beta testing a new mobile payments system through its popular messaging application WhatsApp in India. It is not clear when exactly the social media giant is going to fully integrate the payment option for WhatsApp users in India, but sources indicate that it might be soon.

Article Summary

Facebook is currently testing a mobile payments systems on WhatsApp in India.

The new integration is very similar to the WeChat system by Tencent in China.

The new system is likely to overtake other apps in the country.

Here’s the trading report on FB.

Assuming that the above rumors are true, Facebook’s WhatsApp payment system shall be competing against other mobile payments systems such as Alphabet Inc’s (NASDAQ: GOOGL) Tez and Alibaba Group Holding Ltd’s (NYSE: BABA) Paytm. There are several crucial factors that could quickly propel the WhatsApp payment system to the pole position in India’s growing mobile payments industry that I shall analyze below.

Firstly, the WhatsApp payments systems would be very similar to the WeChat mobile payments system, which is extremely popular in China. This is because, just like its Chinese counterpart, WhatsApp already has about 200 million daily active users in India, which means that it would not need to invest heavily in attracting customers.

Currently, Alibaba’s Paytm is one of the dominant players in India’s mobile payments industry having a slight fast mover advantage over other companies. However, Alibaba is repeating the same mistake it made while competing against WeChat in China by not leveraging existing networks, which saw it lose out to Tencent’s popular platform.

WhatsApp will not need to go through most of the pains that new services such as Tez and Paytm had to in order to attract clients. WhatsApp will simply leverage its popular messaging app by adding the mobile payment option, which will link users’ phones to their bank accounts through a UPI, enabling them to make seamless cash transactions.

The new payment system will largely benefit from WhatsApp’s popularity through the network effect and will likely be successful given that Facebook has partnered with India’s major banks such as ICICI, SBI and HDFC in order to offer the service. The new service is likely to overtake Alibaba’s Paytm and Google’s Tez due to its WeChat-like features and the similarities between India’s and China’s mobile payments industries.

The final details of the new mobile payments system are yet to be known and it is not clear whether the service shall be rolled out to other countries. However, this is a good opportunity for Facebook to start monetizing WhatsApp in much the same way that Tencent has monetized WeChat.

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