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India’s mobile messaging platform Hike beat its competitors to the punch this week, becoming the first chat app to launch a mobile wallet service in the country. The new service allows users to make both peer-to-peer (P2P) and bank-to-bank payments—the latter being facilitated by the government-backed United Payment Interface (UPI) standard.
Hike, with a registered (not active) user base of 100 million people, is far from the market leader when it comes to mobile messaging services in India. According to data from Cheetah Lab, Hike had a reach of 16.1% among Android users in India in the fall of 2016. That put the service in eighth place behind a host of other social media and communication services—chief among them Facebook-owned WhatsApp, with a reach of 91.7%.
A more recent survey of students in urban India conducted by Tata Consultancy Services in December 2016 also found a significant gap between Hike and WhatsApp. According to the poll, 83% of respondents named WhatsApp as a preferred instant messaging app, while just 44% said the same for Hike.
Hike’s unsure footing in India is exactly why it has moved into the realm of digital payments.
Across much of the Asia-Pacific region, messaging services like Hike appear to be taking their cues from WeChat, the China-based communications app that morphed into something more like a full-featured mobile operating system by continually adding new services and functions.
In WeChat’s case, the new features have made the app nearly ubiquitous among smartphone owners, who now use it for anything from ordering food for delivery to booking airline flights. Over the past year, Hike has attempted to follow suit somewhat—rolling out video-calling, new camera filters and animated GIFs to broaden its appeal to users.
Branching out into digital payments, a growing sector of India’s digital economy, is a natural next step for Hike. Just as in China, a large number of consumers in India have had limited access to traditional banking services, instead relying on cash for most of their purchases.
But the uptake of smartphones has put a potential banking tool in the hands of millions of people in India: eMarketer estimates there will be 267.1 million smartphone users in the country this year.
Hike has taken another page from WeChat’s playbook in the form of its Blue Packets feature, gifts of digital cash that users can give to one another, but which expire after 24 hours. These gifts are unabashedly modeled after WeChat’s digital version of “hongbao,” red envelopes filled with cash traditionally given during the Lunar New Year celebration. WeChat’s holiday promotions surrounding digital red envelopes are credited with driving the widespread adoption of its payment service, a lesson that Hike appears to have absorbed.
In addition, the adoption of digital payment platforms in India was hastened in the fall of 2016, when the government demonetized two large-denomination cash notes in an effort to crack down on tax evasion and criminal activity.
Hike has managed to score a coup of sorts by bringing its mobile wallet to market faster than messaging competitors like WhatsApp, which already publicly announced its intent to bring a digital payment service to its more than 200 million active users in India.
But Hike’s new mobile wallet also means it has taken on new competitors in the digital payment space, chief among them Paytm, which boasts 200 million registered users and has drawn substantial investments from both Alibaba and SoftBank. Paytm is already a market leader in financial tech initiatives in India, having recently launched a limited-service online bank that can accept deposits up to INR100,000 (roughly $1,500), but cannot issue loans.
And according to local media reports, Paytm is also looking to gain permission to launch an online money market fund, similar to the Yu’e Bao fund operated by Alibaba in China, which now has more than $165 billion in assets. If realized, that goal would give Paytm market leader status in yet another aspect of India’s fintech world.
China-headquartered companies like Alibaba and WeChat owner Tencent have already blazed a path through the financial tech wilderness of their home market. Now, services in India like Hike are eagerly following in their footsteps.
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