MUMBAI (NewsRise) -- Facebook's WhatsApp messaging service plans to enter digital payments in India, where it will take on Alibaba Group Holding-backed digital wallet company Paytm that has added millions of customers following a government push to promote electronic payments.
Digital payments in India received a fillip after Prime Minister Narendra Modi last year recalled high-value notes of 500 rupees and 1,000 rupees that accounted for 86% of the currency in circulation. The move, aimed at curbing unaccounted wealth, triggered a cash shortage in Asia's third-largest economy, prompting people to explore new digital cash options.
Paytm, backed by China's Alibaba Group, is consolidating its leadership in India with more than 200 million users. In 2015, Alibaba and its financial-services affiliate Zhejiang Ant Small & Micro Financial Services Group, invested over $500 million for a 40% stake in One97 Communications, the parent of Paytm. Zhejiang Ant is the parent of Alipay, China's biggest mobile-payment service.
Paytm had signed up over five million new users within days after the currency ban in November.
According to a Boston Consultancy Group report, India's digital payments industry will be worth about $500 billion by 2020. The report predicts digital payments to account for 15% of the country's gross domestic product in the next four years.
Over the last couple of years, demand for mobile wallets has also increased as millions of Indians get online to purchase everything from books to electronic goods and apparels.
"India is an important country for WhatsApp, and we're understanding how we can contribute more to the vision of digital India," the company said in e-mailed statement on Thursday. "We're exploring how we might work with companies that share this vision."
Analysts say young Indians spend enormous amounts of time on WhatsApp, the most popular messaging service in the country, giving it an edge over its rivals.
"WhatsApp has the kind of infrastructure and acceptance in India that it can scale up and turn into a really big threat to Paytm," said Rohan Agarwal, senior consultant at Red Seer Consulting. "While others are also competing with Paytm, none has been able to catch up so far."
WhatsApp has placed an advertisement on its website seeking a digital transactions lead for India, who will be based at Menlo Park, California. The messaging app has more than a billion users, and a fifth of those are in India.
The company has sought a candidate who is familiar with the working of the government's Unified Payment Interface, an instant online payment system, as well as the national digital identity database Aadhaar and BHIM payments app that allows money transfer and payments using mobile phones.
The ad is seeking a candidate who can help scale up global support for digital transactions on WhatsApp, suggesting the messaging service may expand it to other markets.
WhatsApp's digital services drive comes as the company is looking to make money out of its popular messaging service. According to a Reuters report in March, the company is testing a system that would let businesses talk directly to its users.
Global messaging services such as WeChat, a unit of China's Tencent Holdings, have already started making a push towards digital payments that allow users to turn their chat into a platform to pay utility bills, buy movie tickets and transfer money.
Facebook bought WhatsApp in 2014 for $19 billion, hoping that the messaging service will eventually morph into a platform with new functionalities such as payments and app distribution.
--Dhanya Ann Thoppil