Taking payments in chat to market

There were some high profile announcements of WhatsApp payments available in Brazil (https://tcrn.ch/3dzlnC9) recently. Anybody interested in chat commerce sat up and took notice. Some also tried out Facebook Pay, the payments service WhatsApp owner Facebook launched last year. I can say with some certainty, we all were excited about the possibility. The interface was clean and the thinking done. The deployment reminded one of Venmo to some degree. Only better. The most important thing was one could see the potential, and the potential was big.

And then, not too long after the announcement, we read about the suspension of the service (https://tcrn.ch/383b5sI). There was a lot of discussion of what happened, and it needs some consideration in order to understand the implication for chat commerce and payments in general.

WhatsApp has been testing payments based on Facebook Pay for some time in big emerging markets (i.e. India, Mexico and Brazil), and while it holds tremendous potential, it has not officially been approved to operate. WhatsApp’s big competitor and leader in China, WeChat, has been offering payments on their platform for years and has shown tremendous growth. Tencent, the owner of WeChat, also tried to launch WeChat pay – largely unsuccessfully – in markets outside China for years. One thing is clear without doubt. Payments in chat are very relevant, and one should take notice.

Why is it so difficult to launch a brand new payment system? There are basically three considerations.

1. Regulatory considerations are the biggest hurdle. It is illegal in pretty much any country to offer payment services, if the service is not licensed. The problem with this is that there is almost no standard in terms of how to conform. It is very different from one country to another. Most countries have passed unique payment system laws, and in others, regulators are trying to align all payment operators to utilize national settlement systems – usually real-time and free or inexpensive. While these initiatives are to be commended, no country has really been successful in obtaining comprehensive adoption. India arguably has made the biggest advances with some drastic measures, such as withdrawing paper notes in certain denominations almost overnight . To get regulations right to launch payment systems is hard work.

2. The second challenge is to create a payment ecosystem of payers and payees. Think about it. If you have a payment instrument that you could not use anywhere to pay, you would quickly forget that you have it, and it will fall in disuse. Similarly, a merchant would not subscribe to a payment system to accept payments, if there is no one to pay. This chicken and egg problem is the hardest to solve and requires huge investments to just move the needle. A system where someone can pay and receive payments is the easiest to execute on. This is usually referred to as person-to-person payments (P2P), but, while attractive, has limited utility. The easiest way to get traction fast is to create a system that is open to entice many parties to participate.

3.The last challenge to overcome is adoption. Even if you have regulatory approval as well as many merchants to accept payments, you still have to convince people to use it. You have to make it compelling enough for them to discard the payment system that they are used to and that they use every day and everywhere. You have to make sure that they trust the new system more and you need to award them to use it. This is difficult. Consider what it will take for people to stop using credit cards and start using an alternative payment system. People actually trust cards. They can use them anywhere. They are convenient and easy to use, and your bank pays you rewards for using it. What will it take for you to stop using your card and opt to start using something else?

Bottomline. When thinking of deploying payments in chat, talk to the experts.