Lending without Meeting: WhatsApp and Jio

WhatsApp Money Coming Soon!

If you are someone who runs out of money during the month-end or looking for some short term loan here is the good news for you! WhatsApp, which is merely a middleman connecting the one with the rest of the world, is looking to lend money to its customers, exclusively in India.

The news has come after its parent company Facebook decided to take 9.9% stake in Jio and hence last month they altered their Memorandum of Association adding one of the objectives as “To advance money or give credit on such term as may seem expedient, and with and without security to customer and other”  which clearly indicate that WhatsApp is eyeing the loan market of India, it seems that the recent alliance will also help to expedite the process of entering of Whatsapp in payment market delayed by regulatory hurdle.

What is MOA?

MOA is one of the many legal documents to be prepared during the formation of the company. It mentions the objectives and powers of the company. If a company engages itself with anything outside the mentioned objective in MOA, it will be null and void.

What is the history behind it?

Facebook has been trying for a long time to roll out a payment system in India and has indulged in many discussions with NPCI (National Payment Corporation of India) and has resolved any expected hindrance in the deal to make it full proof. WhatsApp wants to utilize its strong customer base of 400 million, which will serve as a readymade franchise, and it will enjoy strong penetration in the market. 

Major roadblock here is the data localization norm which mandatory for WhatsApp to comply with for full rollout of WhatsApp Pay. For context, the peer-to-peer lending service of WhatsApp is under pilot mode since 2018 with 1 million users in India having access to it, so to accelerate the full-fledged rollout, WhatsApp needs to comply with 100% data localization norm.

Will WhatsApp set up a bank in India?

Facebook has clarified that the company will not engage in any banking business within the meaning of the Banking Regulation Act 1949. Hence, we can say that the company is looking to explore the partnership with various banks in India.

What about the competition?

After Demonetisation in 2016, Digital payments gained immense popularity and hence some extrapolation has resulted in garnering the attention towards lending and credit service, offered via the digital medium. 

With most of the apps serving the users with UPI transactions without charging any fee from users, there is no scope of increasing revenue. Hence, all the major players in the market like PhonePe, Google Pay, Paytm, etc. are looking forward to diversifying as well.

What WhatsApp wants to do?

If we look at the rational of Facebook-owned company, there are two paths it may be taking; either exploring the business option with its large customer base in India or looking to monetize here. Currently, there is no direct revenue from this service, and monetization is the thing they have been trying to do through WhatsApp Business for a while now. Hence if this is a step to take WhatsApp a bit closer to monetization, then it would help them to make more money out of the service.

How will WhatsApp payments benefit Reliance?

Reliance, as well as Facebook, has been looking to venture into the e-commerce business, and the logic to onboard mom-and-pops store in the digital platform has been at the top of the mind of both of these companies. Hence, Facebook will leverage the surge in usage of its application with JioMart-WhatsApp integration, helping to create a platform, and WhatsApp can be used to integrate Order, Payment, and Communication.   

Jio Meet to launch very soon!

It seems that after the partnership with Facebook, Jio is again ready to steal the limelight and is all set to launch its new product Jio Meet very soon. Amid the security concerns of Zoom and less popularity of Google Meet, CISCO Webex, etc. Mukesh Ambani is diversifying his business and ready to venture into the field, provided the availability of excellent opportunity.

But, Video conferencing service is no cakewalk for Jio as Google also announced that they have pulled Google Meet outside Gsuite and made it free for everyone. Hence, more people will start using it very soon. Google is planning to roll out this function from today in a phased manner and is expecting a full rollout in a week or two.

Conclusion

Now amid this COVID 19 scenario, it will be interesting to watch how long this indefinite halt will continue. When WhatsApp comes out with the rumoured WhatsApp lending service and how the situation build up in the video conferencing segment when everyone is looking at the ease of doing work from home. It will be interesting to watch who acquires a giant pie in the market.