Are we at a WhatsApp Moment in Financial Services?

The Original WhatsApp Moment

  • Two emerging trends around the time : migration from voice to data network, and migration from desktop to mobile web.
  • It was not either of the two sets of incumbent players who shaped the future of messaging : it was a whole new company called WhatsApp.
  • It used phone number as identity, and contacts as the social graph.
  • Today, WhatsApp does 30 billion msgs/day vs. all telecom operators across the world put together doing only 20 billion msgs/day. And WhatsApp has just 40 employees.

Smartphones in India

  • Smartphones now cost no more than 50–60 $.
  • Will have more than 600 mn smartphones by 2020.
  • India has the highest percentage of mobile in eCommerce (close to 40 %), much higher than China, US etc.
  • Flipkart and Snapdeal have higher percentage of transactions on mobile than desktop.

Move Towards Cashless Payments

  • In Q1 2014, electronic cheque clearing has crossed manual clearing (in just 4 years since its launch).
  • IMPS, which allows instantaneous credit 24/7, was launched in 2011. In just 3 years since launch, the volume of remittances has overtaken money orders in remittances. It’s one third of remittance.
  • IMPS will soon overtake debit and credit card sales. Q1 ’16 overtake debit card sales at PoS(point of sale) terminals and in another 4–5 quarters it will overtake credit card sales.
  • eCommerce is expected to grow by 4 times in the next 5 years. The percentage of online payments in eCommerce (as opposed to CoD) is exptected to double. So, digital payments will grow by 8x overall.
  • India has 900 million mobile phone users, who do an average recharge of Rs 25, 4 times a month. Only 3 % of these are digital recharges. That number is going to grow dramatically.
  • Direct Benefit Transfer (DBT) of LPG subsidy alone accounts for 3 million transactions a day, reaching 120 million customers. Once DBT implemented for other subsidies, it will grow at least 4x, a total amount of 50 billion $ every year.
  • 11 payment bank and 10 small finance bank licences have been announced.

Foundations for a Cashless Economy

  • Debit and credit cards are a 2-factor authentication : what you have (the card) and what you know (the PIN). Phone will replace the card as the what-you-have, and Aadhaar authentication is going to replace the PIN. Single-click 2-factor authentication in real time.
  • The incremental cost of adding an iris sensor to a smartphone for biometric authentication is less than 5 $. Aadhaar authentication using iris sensor on a smartphone has already been tested successfully (as demonstrated in the video).
  • Under the Jan Dhan Yojana, 200 million bank accounts have been opened already. Every Indian household will have a bank account by 2020.
  • 1 Billion Aadhaars — 1 Billion bank accounts — 1 Billion mobiles (JAM trinity)
  • The only scalable way to think of payment infrastructure is smartphones.
  • Whereas debit cards are growing at 54 %, ATMs are only growing at 30 %, credit cards are growing at 15 %, PoS machines are growing at 10 %. The classic hardware setup of PoS machines is a very slow process.
  • The growth in the number of consumers coming on board is going to be much faster than the growth of these existing systems.
  • Smartphones will replace physical cards as the issuing device, and also replace PoS machines as the acquiring device.
  • NPCI is rolling out the Unified Payments Interface (UPI), enables P2M and P2P payments from bank accounts, just like mobile wallets, but across different bank accounts and wallets.

Projections for Existing Systems

  • ATMs to grow from 180,000 to 270,000
  • PoS machines may go from 1.2 million to 1.5 million
  • Business Correspondents (BCs) may grow from 400,000 to 3 million
  • Retail outlets go from 12 million to 15 million
  • None of these alone are enough serve the banking needs of 1 billion people. It has to be through smartphones.

Infrastructure for Digital Payments

  • eKYC to open bank account
  • eSign is digital certificate using Aadhaar
  • Digilocker (everything on the cloud)
  • Unified Payments Interface


  • 1 billion customers and 50 millions businesses can get easy access to credit, using credit risk assessment algorithms.
  • Payment banks, with their diverse backgrounds, are going to bring in new technology, new business models and new capital.
  • Investors are willing to stomach high spending on gaining customers and intimidating competitors in an attempt to create ‘natural monopolies
  • Winner takes all” in tech. The biggest player can take huge losses for a long time for gaining market share e.g. Uber is 50 billion $ vs Lyft is 5 billion $.
  • Banking in India is going to see similar disruption.
  • Telcos have advantages here because they have distribution.
  • Wallets have their own advantages because of their experience in payments.
  • PayTM is doing more transactions than any bank in just 5 years.
  • Everyone has access to the same technology, and with many incumbents it is simply a mindset issue. It’s a matter of who uses the available technology the best.

Founder, Jovian

Founder, Jovian