Meta Platforms: WhatsApp Pay Gains More Traction - Seeking Alpha
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Sjo/iStock Unreleased via Getty Images

Sjo/iStock Unreleased via Getty Images
Meta Platforms, Inc. (NASDAQ:FB) reported first-quarter earnings yesterday (April 27), and the stock surged almost 18% in after-hours trading as the company easily topped Wall Street estimates for both earnings and daily active users. A couple of Seeking Alpha authors have already covered the recent earnings report in detail, so in this article, I’m not planning to discuss yesterday’s earnings. WhatsApp Pay – a feature that I always thought would fetch notable revenue for Meta Platforms in the long run – is moving in the right direction in India, which is one of the largest consumer markets in the world. In this article, I will highlight some recent developments along with the challenges faced by WhatsApp Pay in India.
The National Payments Corporation of India, a specialized division of the Reserve Bank of India that oversees retail payments and settlement systems in the country, approved WhatsApp Pay to expand its payment services to 100 million users a couple of weeks ago. This is a major milestone for WhatsApp Pay, which the company began testing in 2017. Although this is a very positive regulatory decision, the company faces stiff competition from established local and international players in India. That being said, I believe the benefits of this decision are undermined by the investing community because of WhatsApp Pay’s meager market share in India. In my opinion, a successful run in India will serve as a platform for Meta to launch this mobile payment service effectively in other regions given that India is one of the most competitive mobile payment markets in the world, which makes it a good market for Meta to exploit and learn from its mistakes.
In 2017, WhatsApp began testing its payment services based on the Unified Payments Interface, commonly referred to as UPI payments. However, following its pilot project and eventual rollout in India in 2018, users and officials were concerned about the security of users’ payment data and Facebook’s market power. After ensuring compliance with Indian regulations including data storage rules that require all payments-related data to be held locally, the NPCI granted WhatsApp authorization to begin the payment service in 2020. The UPI payments feature was initially available on WhatsApp for 20 million users before being expanded to 40 million in November of last year. The NPCI recently stated that WhatsApp has been permitted to expand its payment services to an additional 60 million users, bringing the total to 100 million.
The NPCI wants WhatsApp to roll out the payment services in stages which is making it difficult for the company to expand the offering to a wider audience. WhatsApp has requested NPCI several times to operate “without a cap,” but the authorities believe the payment system within a messaging app could strain the country’s financial infrastructure. WhatsApp currently has over 400 million users in India – which makes India the largest market in terms of users – but the cap on its payment services is acting as a barrier for the company to effectively monetize this massive userbase. Due to the slow rollout of WhatsApp Pay, the company is facing intense competition in gaining market share from other payment service apps such as Google Pay and PhonePe which control 49% and 35% of UPI market share, respectively. In March, WhatsApp completed 2.54 million UPI transactions worth INR 2.39 billion, while PhonePe completed 2.5 billion transactions and Google Pay completed 1.8 billion transactions.
UPI has become one of the most popular payment systems in the country after the demonetization of high-value currency notes in 2016. Over 5.4 billion transactions were reported on the payments network in March 2022 alone, but WhatsApp Pay still has a long way to go to catch up to its competitors PhonePe and Google Pay in terms of market share. The NPCI is currently in discussions to enforce a rule that would ensure no single payment services provider accounts for more than 30% of all UPI transactions in a month. This could have a significant impact on all UPI-based payment service providers, but for WhatsApp Pay, this could turn out to be welcome news as the company will then have regulatory support to compete with its established peers.
In addition to its in-app transaction services, Meta Platforms is yet to explore opportunities in peer-to-merchant (P2M) transactions. In December 2020, WhatsApp announced that its WhatsApp Business app, which was embraced by Kirana shop owners in India, had almost 15 million users in the country. In addition, in 2019, the company launched a catalog feature for shop owners to use in showcasing their products to customers, and it continues to invest in new tools to improve users’ message-based shopping experience. WhatsApp has also stated that it would allow the sale of “sachet-sized” health insurance products on its platform. In 2020, the company completed trials in selling micro-pensions, edtech, and agritech products on the WhatsApp Business platform in India.
Meta Platforms initially planned to launch WhatsApp Pay internationally within six months after its initial debut in India in 2020 for a limited number of users. However, because of the controversies surrounding data breaches and data transfers at the time, the company was unable to expand its peer-to-peer payment services to other countries. Due to complex and changing regulations, launching in India proved difficult as well. Many social media companies have recently been under pressure to comply with regulations requiring them to store data locally.
In June 2020, Meta launched WhatsApp Pay in Brazil, but it was suspended by the Brazilian Central Bank due to concerns about competition in the payment system market and compliance with regulations. After the Central Bank approved Meta’s payment system, the services were relaunched in May 2021. However, the amount that can be sent and received, as well as the number of transactions per day, remain limited.
The difficulties that the company faced in launching its payment services in India and Brazil are far from over. Although there is a huge opportunity for the service to expand, particularly in the medium and small business markets, the global rollout is likely to take longer than expected. Another reason is the recent conflict over data transfer regulations between the EU and the United States. In July 2020, a landmark ruling prohibited transatlantic data transfers, with no resolution or alternative in sight for U.S. companies that rely heavily on data transfers to function efficiently.
In many of my previous articles on Meta Platforms, I have highlighted the expected monetization of WhatsApp as a catalyst for the company’s earnings growth. For this reason, it is important to closely monitor developments surrounding WhatsApp Pay to identify an inflection point in the story. So far, the company is making slow and steady progress in India and Brazil, and it would be reasonable to conclude that WhatsApp Pay will not be adding any meaningful revenue to the company this year as well. That being said, I believe Meta Platforms is moving in the right direction to transform WhatsApp into a super-app similar to WeChat in China. I continue to believe Meta Platforms is undervalued based on the monetization potential of WhatsApp and Instagram, the long runway for advertising growth internationally, the exciting investments in bringing the Metaverse into life, and the recent pullback of the stock price.
Meta Platforms: WhatsApp Pay Gains More Traction - Seeking Alpha
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Meta Platforms: WhatsApp Pay Gains More Traction - Seeking Alpha

This article was written by
I am an investment professional with 7 years of experience in financial markets. I specialize in U.S. equities and incorporate a top-down approach to identify developing macro-level trends and the companies that would benefit from such trends. I am a strong believer that the best investment opportunities could be found in under-covered equities. Please click the “Follow” button to get timely updates on new articles.
I am the founder of Leads From Gurus, a Marketplace service on Seeking Alpha that focuses on uncovering alpha-generating opportunities.

I currently work with leading financial publications including Refinitiv, Seeking Alpha, ValueWalk, and GuruFocus.
I’m a CFA level 3 candidate, an Associate Member of the Chartered Institute for Securities and Investment (CISI, UK), and a candidate in the Chartered Wealth Manager program.
During my free time, I enjoy reading.

Disclosure: I/we have a beneficial long position in the shares of FB either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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