MUMBAI (NYTIMES) - India's smartphone users love Paytm for sending money and WhatsApp for sending messages. Now each company is getting into the other's business.
Paytm unveiled an updated version of its service on Friday (Nov 3) that integrates chat features, including photo and video sharing, into its market-leading digital wallet.
The move is a pre-emptive strike against WhatsApp, the global messaging app used by about two-thirds of India's 300 million smartphone users. WhatsApp, which is owned by Facebook, has been developing a person-to-person payment service for India that it plans to introduce in the next few months.
Deepak Abbot, Paytm's senior vice president of product, said his company had decided to add the communications feature, called Inbox, because its executives saw millions of people using its service to send money to other individuals without any way of discussing those payments inside the app.
"If I sent money to you, I'd wonder, 'Hey, have you received the money?'" Abbot said in an interview. "Either I'd call you, or find another messaging app." From that simple problem, a full-fledged chat service was born.
Paytm was founded in 2010 as a simple app for paying mobile phone bills. It has grown exponentially since Prime Minister Narendra Modi shocked India last November with an edict declaring all large bank notes invalid. That so-called demonetisation forced Indians to exchange their cash for new bank notes, a tortuous process that prompted many people to look for digital alternatives to pay bills and buy daily necessities.
With nearly US$2 billion (S$2.72 billion) in financing from Alibaba, China's leading e-commerce company, and SoftBank, the Japanese investment giant, Paytm jumped in. It marketed itself to small merchants and consumers as an easy way to make all sorts of payments with a few taps on a smartphone. The company now offers a wide range of products, from gold by the gram to airline and movie tickets, and it said 100 million Indians visited its service at least once a month.
WhatsApp, which claims more than 200 million monthly active users in India and 1.3 billion worldwide, has eyed business services and person-to-person payments as a potential way to generate revenue from what has been a free service. Facebook paid US$22 billion in cash and stock for WhatsApp in 2014.
The messaging service has already begun experimenting with verified business accounts in India, which companies use to communicate with customers. The payments feature will let Indian users send immediate payments to one another via a chat message.
Neeraj Arora, head of business at WhatsApp, said in an October interview that his team was studying opportunities created by India's demonetization and the government's broader campaign to push more business and services online.
"They are trying to digitise every part of society," said Arora, who also sits on the board of Paytm. "We play right in the middle of it. It's natural for us to think about improving the experience." WhatsApp's overall popularity could give its new payments service a leg up, but Abbot said it would also raise awareness for all digital payment services, including Paytm.
WhatsApp, like another new service from Google, Tez, will probably be limited to transferring funds from one person's bank account to another's because of complex Indian banking regulations. Paytm has cast itself as a broader financial player, handling payments made by credit and debit cards, the government's electronic transfer system, and digital wallets.
A Paytm banking affiliate is exploring how to offer loans too small to interest a normal bank, with creditworthiness assessed by examining a borrower's transactions on the service. And a Paytm digital mall is selling physical products.
Messaging is just Paytm's latest brand extension. Abbot said other plans for the chat service included a personalised news feed of special offers based on each user's history in the app.
"Eventually it might become the main screen for Paytm," he said. "Paytm is at heart a payments company."