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Remember when the prevailing approach to providing consumers with apps was “unbundling,” where publishers would fracture their services according to a specific purpose? How things have changed.
Now, India-based digital payment service Paytm plans to launch a messaging service, according to a report in The Wall Street Journal. The new service is expected to begin its rollout by the end of August, giving users the ability to send texts, photos and videos. While the move might seem confusing on its face, Paytm has a solid rationale for its expansion into chat services.
Messaging apps like WhatsApp experienced strong adoption in India by offering users the ability to text for free, thereby sidestepping SMS charges. That has resulted in strong growth for such platforms.
According to data from Cheetah Lab, WhatsApp had the highest reach of any social media or communication app in India in fall 2016.
WhatsApp was also the messaging app of choice among students in urban areas of the country polled in December 2016 by Tata Consultancy Services. The survey found 83% of respondents used WhatsApp, while 68% used Facebook Messenger and 44% were on homegrown messaging service Hike.
While messaging apps were growing their user bases, Paytm was doing the same. The service reported a sharp uptick in both downloads of its payments app and transaction volume following the government’s decision to demonetize two high-denomination cash notes last fall.
The move, intended to crack down on corruption and tax evasion, had the unintended effect of giving India’s long cash-dependent populace a reason to try out new digital payment services—such as Paytm—that could be accessed on a smartphone.
In the era of unbundling, Paytm would likely be content to build on its existing user base. But China’s massively popular messaging platform WeChat has provided tech firms with a new model for the exact opposite trend: the packaging of once disparate services into one platform.
WeChat allows its users to do nearly anything they could want to via its service, including paying bills, ordering food, hailing cabs and booking their travel. In that sense, it now more closely resembles an operating system than a messaging service.
Other messaging platforms, most notably WhatsApp, have taken notice. In July, WhatsApp received the go-ahead from the National Payments Corporation of India (NPCI)—a trade group overseeing digital payment services in the country—to use its Unified Payments Interface (UPI) standard to let WhatsApp users make payments and transfer funds without leaving the app.
That’s something Paytm can’t ignore, given WhatsApp’s dominant position among messaging services in India. Since WhatsApp has some 200 million monthly users in the country, any concerns that the Facebook-owned platform is encroaching on Paytm’s payments turf are warranted.
In addition, Hike introduced its own digital payment service in June. To ensure the success of this service, Hike is likely to draw on the experience of one of its major investors: Tencent, the parent company of WeChat.
As a result, Paytm has been forced to offer its own messaging platform, in the hopes that the process laid out by WeChat—a messaging platform that grew into a payments service, among many other things—can also work in the other direction.
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