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The huge potential of WhatsApp's payments in Latin America

Acquired in 2014 by Facebook, the messaging app never contributed to the company's revenue. But everything can change with the upcoming payments function

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The technology market was taken by surprise in February 2014 when Facebook, already the world’s largest social network, acquired WhatsApp for $19 billion. On the one hand, it made sense for Mark Zuckerberg to increase his empire: the app was already one of the most used messengers in the world, with 450 million monthly active users, and the company had just bought Instagram in a similar strategy two years earlier. On the other hand, a question emerged: how will the chat service add to the company’s generous financial report?

The answer so far remains the same: it just doesn’t add anything.

Apart from the fact that the app used to charge $1 per year in some regions until 2016, when this practice ceased to exist, the messaging app neither contributed nor contributes in revenue to the company, which profits mainly through the advertising systems on Facebook and Instagram.

Speculations about WhatsApp’s monetization come and go, whether in the form of banners on the app’s interface or on its Status service (a copy of Instagram Stories, which, in its turn, is a direct copy of Snapchat) but they never truly materialize.

The company, however, seems to have finally found a way to make money from the app and, consequently, turn it into something much bigger than a chat service

Under testing for about two years now, a payment system built into WhatsApp should be made official in the coming months. The upcoming service will not only modify the company’s business model, but mainly open up new market horizons and in many regions.

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Far beyond messaging

WhatsApp Payments should act as a bank transfer facilitator. The idea is that each owner of an account on the messenger (that is, a phone number) will link the profile to a credit card. Thus, it will be possible to receive and send amounts to contacts added through this digital wallet, in an intuitive way when starting a conversation.

It is tempting to imagine the ease that can be generated with this. Think about your circle of friends and family: however unfamiliar some people are with new technologies, it is difficult to find someone who does not use WhatsApp, even if only for emergencies.

The service is being tested in India and has secured regulatory approval from the National Payments Corporation of India (NPCI). India’s choice is justified: the country is the largest WhatsApp market, with about 20% of its download base, but this is not the only place that should embrace this novelty en masse.

Mexico and Brazil are among the next countries to receive WhatsApp Pay, and Latin America as a whole is a region that has adopted the service as part of everyday life.

The company knows the importance of the region for the application, so much so that it chose Brazil as the theme and target audience of its first worldwide advertising campaign.

But let’s take it easy

The eventual arrival of WhatsApp Pay to the its main markets should cause many changes in the use of the application. To begin with, the security issue must be reinforced: if scams carried out by cybercriminals currently steal profiles and personal data through chat windows, they will soon have a new target and will require more care from the company, as well as increased attention from the community.

At the conference in which Zuckerberg announced the progress of the tests with the service, he said that sending money through the app will be “as quick and easy” as sending a photo.

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This comparison, at first glance, is exciting because of the promised practicality, but also worrisome. After all, our savings require care and are not the same as a meme or animated GIF that circulates at high speed in the application.

It is worth mentioning that WhatsApp will not be alone in this market: Google, Apple, PayPal and Samsung are just some of the giants that offer virtual wallets for the purchase of products online, while applications such as PicPay and PagSeguro already offer similar national alternatives.

These competitors must have some time to prepare: the use of WhatsApp Pay involves some bureaucracy to be approved by both the government and the institutions that become partners. We are talking about a window of months, but Facebook is aware of the deadlines and is gradually scaling the service. It will be an interesting rivalry to follow.

The challenges of the new service are many, but it seems that Facebook has some cards up its sleeve. One of them is popularity: the base of possible members is already consolidated and involves people who spend the day exchanging messages on the platform.

In February of this year, WhatsApp surpassed the mark of two billion users worldwide and remains as one of the most downloaded applications for Android and iOS, the two dominant mobile operating systems on the market. That is, even if the company charges a few cents per transfer, or that the partner banks absorb this cost, the use of WhatsApp is massive enough to make the implementation of the new service worthwhile.

Just a few clicks away

Another asset for the new service’s success is its use within WhatsApp Business, the brand’s application aimed at small and medium companies. This is the segment that can most benefit from the platform– after all, many informal sellers and local businesses have in WhatsApp their main communication channel with the consumer in the application.

Smartphone screens showing WhatsApp Business, the app’s version for business, with contacts and product catalogs. Image: WhasApp / Disclosure.

The centralization of payment on the same platform where the contact between the parties occurs can intensify sales, and help to boost the revenue of these small and medium-sized companies

Returning to the initial panorama of this column, it is difficult for Facebook to see the acquisition of WhatsApp as wasted money, even with such a delay in the app’s monetization.

The reputation of the messenger remains strong, the growth of its user base shows no signs of slowing down and the arrival of a payment service may even attract an audience that is not yet loyal to the application.