Why Messaging Service Apps Are Interested In India's Digital Finance Market

New Delhi: Need to transfer money urgently to your friend? Push the send button on your favourite messaging app and send the sum. Digital finance is spreading in India, and quite fast, as digital payments surged to 55 per cent in 2016-17 alone, compared to a growth of 28 per cent in the last five years. Being an emerging market, new avenues of exploration are open in India's digital finance market and many players are trying to cash in on the opportunity. India reportedly had 133 million messaging app users in 2016 and sensing the opportunity, several messaging apps are launching or on the verge of launching payment wallets which would ease digital transactions in India.

In June 2017, Hike Messenger launched its own payment wallet. The wallet is United Payments Interface (UPI) enabled, and allows users to transfer money across banks, along with enabling them to do mobile recharges. Hike is the first messenger app to launch a payments service in India, and its 10 crore users will now be able use the messenger app as a digital wallet as well. Hike's entry into the digital wallets space also brings forward the question of when and how do WhatsApp and other messaging services plan to enter the digital finance market in India. But what is it about messaging apps that is making companies more interested in using them as potential tools to enter the digital finance scenario?

The sheer number of users is the primary reason why messaging apps are looking to enter the digital finance scenario in India. WhatsApp has 200 million active users in India, making it one of the most used apps in the country. The already existing large user bases make entering the digital finance market much easier for messaging apps, as they do not require building a user base of their own. This is precisely the reason why Google, Amazon and WhatsApp are all potential entrants in the digital finance market. Users can chat and conduct transactions on the same platform, therefore making it easier for them to learn the language of digital finance. Users also need not use a different app for transactions as they can conduct transactions and chat from a singular app itself.

Both social media and messaging app companies are banking on their popularities among users to enter the digital finance market. They are hoping that users of the messaging apps will show similar interest in using them as digital wallets, said A.P Hota, Managing Director, National Payments Corporation of India.

The nature of messaging apps is another reason why owners are interested in transforming them into simultaneously usable digital wallets. Messaging apps are used to share a wide variety of items, ranging from photos and videos to information. People often conduct businesses using messaging apps, as they use the platform to buy and sell products, negotiate prices and exchange photographs of items to be sold or bought. Such a large market can be put to perfect use if digital payments also become a part. Hike Messenger's wallet already allows the user to pay for mobile phone bills. The digital payments system could also see the sales of insurance policies and mutual funds in the future, as the reach is huge and will only increase in the future.

The transformation of messaging apps to payment apps is however, not without certain drawbacks. To begin with, the competition is tremendously high among existing messaging apps. Transition to payment apps will only increase the competition and every competitor will be expected to cover all aspects of digital finance, or lose consumers.

Another important question is the security aspect, which amidst so much competition may be compromised, as the threat of hacking has already been witnessed with the rise of India's digitisation of finance. Whether these messaging apps will comply with all the rules related to secure transactions while entering the digital finance market may make users wary.

There are strict regulations which must be followed when launching digital payment systems and all messaging services must comply with these. No company can afford to risk the security of consumers' transactions as the competition is too thick to commit such errors, said Mr. Hota

It will get interesting as more messagers and apps are expected to enter the digital payments arena by the end of 2017. Hike has already made a smart move by becoming the first entrant. What remains to be seen is who else launches payment wallets and what are the features that would be incorporated that will separate one payments wallet from the other.

Also Read: Railways Extends Service Charge Waiver On E-Transactions Till September