WhatsApp will pilot multiple projects to deliver insurance, microcredit and pension products to Indians over the next two to three years, WhatsApp’s India head, Abhijit Bose, announced at the Global Fintech Fest hosted by IAMAI on Wednesday. For each vertical, WhatsApp will partner with banks, NBFCs and technology companies for the pilots. The platform will co-invest in projects “that show promise” and scale them.

However, Bose warned that these solutions will not be one-stop solutions. WhatsApp’s partners — banks, financial service companies, fintech service providers — will be the ones to provide the services. WhatsApp will adopt a venture model for fintech. He also cautioned that these are “controlled pilots” where “we don’t know what will work and we don’t know what won’t work”. It is on the basis of user acceptance that that WhatsApp will invest and scale up the “solutions that deliver results”.

For pension, WhatsApp could, for instance, test with a ₹50/day product from regulated institutions, according to a slide that Bose shared. WhatsApp would assist with distribution to reduce friction and operational costs.

WhatsApp Presentation

Source: Bose’s presentation

Onboard more banks to cater to rural, lower income segments

This year, WhatsApp wants to onboard more banks, especially to cater to rural and lower income segments, Bose said. Earlier, it had onboarded ICICI Bank (which had more than 10 lakh users within three months of launch), Kotak Bank (which has 20 lakh users and 98% YoY growth) and HDFC Bank.

WhatsApp is hoping to capitalise on its wide adoption to “help low wage workers in the unorganised, informal economy” to easily access three products — insurance, microcredit and pensions. Bose said that despite having “one of the most impactful pension schemes” in the world, India has been unable to scale the scheme because of complicated processes, lack of digital literacy, limited access for agents, especially in smaller cities where the ticket sizes are low, high unit cost for suppliers given the manual friction and the life cycle of a customer. “This limits their ability to support the low-end products beyond urban clusters,” he said.

Through these pilot projects, WhatsApp is hoping that consumers will build financial assets, history of regular savings, and digital footprint, thereby making it easier for smaller businesses to borrow money. The problem that banks face with lending money to MSMEs, especially in remote areas, is that they have to “create the P&L [profit and loss statement] that doesn’t scale”, Bose said.

Using a study from Bain, Bose explained that in 2018, only 15% of loans less than ₹5 lakh were handled by formal sources. “For us, as a country, to hit our 2025 goals, they [Bain] estimated that over $700-800 billion of additional credit would have to be in the system for us to meet the demand,” he said.

WhatsApp Presentation

Bain study about the credit break-up in the SME Economy. Source: Bose’s presentation

WhatsApp in numbers

With over 400 million users in India, Bose said that India is WhatsApp’s largest market. Thus, “what we discover and scale here will become the template for other countries”, he said. Currently, 15 million small businesses use WhatsApp to connect with their customers, and “thousands of large enterprises and financial institutions” that use the WhatsApp Business API to serve customers at scale.

WhatsApp Pay has hit hurdles with launch in India

WhatsApp Pay was piloted over two years ago in India and is yet to see a full launch. Facebook and WhatsApp have run into hurdles around India’s data localisation mandate and the related regulatory clearances. At least two different cases have been filed in the Supreme Court against the service.

In February, WhatsApp had secured a licence to operate from the National Payments Corporation of India (NPCI), after securing the RBI’s approval. However, soon after that, an interim application in the Supreme Court challenged the NPCI and RBI’s green-lighting of the service, calling for the “unlawful trials” of the payments service to stop. Following that, another petition in the Supreme Court, filed by think tank G2 Chambers, argued that WhatsApp “has been known to have failed to secure sensitive data of its users” and has also “failed to assume accountability and responsibility for the same”, and called for WhatsApp Pay’s trials in India to stop. In an affidavit, WhatsApp questioned the credentials and suitability of the petitioner, calling it a “busybody” that, as an “unregistered Think Tank” that was just seeking “to create new barriers for WhatsApp Pay under the guise of enforcing fundamental rights”.

And if that was not enough, Brazil’s central bank suspended WhatsApp’s payments service just a week after it was launched in June to “preserve an adequate competitive environment”, and to ensure an “interoperable, fast, secure, transparent, open and inexpensive payment system”.