Facebook Pay, How WhatsApp Payments in Africa could look

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Source: Facebook Pay

Facebook Pay 

Facebook has kept up its pace in investing in building the future in the past few months, based on the different announcements: investments in companies, acquiring Giphy, African Internet project, new zoom like features and now launching the use of Facebook Pay on Whatsapp in Brazil. On Whatsapp’s blog they announced:

We’re excited to announce that starting today we’re bringing digital payments to WhatsApp users in Brazil. People will be able to send money securely or make a purchase from a local business without leaving their chat.

The over 10 million small and micro businesses are the heartbeat of Brazil’s communities. It’s become second nature to send a zap to a business to get questions answered. Now in addition to viewing a store’s catalog, customers will be able to send payments for products as well. Making payments simple can help bring more businesses into the digital economy, opening up new opportunities for growth.

Initially, the plan was to launch Facebook Pay in India which has 300 - 400 million monthly active users, but it had to settle for its second-largest market Brazil (120 million MAUs) due to regulatory restrictions

The payment service offered on Whatsapp is part of the roll-out plan of Facebook Pay which was launched last year, it’s available in many countries around the world, and notably 16 African countries: Algeria, Angola, Botswana, Côte d’Ivoire, Gabon, Ghana, Kenya, Seychelles, Mauritius, Morocco, Mozambique, Tunisia, Nigeria, South Africa, Kenya.

How it works: Simply link up your WhatsApp account to your Visa or Mastercard credit or debit card. It’s currently free for consumers to use (no commission fee is taken) but businesses pay a 3.99% processing fee to receive payments. Transactions are completed by a six-digit PIN or fingerprint.

In the bigger scheme of things, this move is all part of Facebook’s move to diversify its revenue stream, which is majorly Advertising revenue. In 2019, about 98.5 per cent of Facebook's global revenue was generated from advertising, while the rest came from payments and other fees. 

If there’s any hint as to where Facebook’s Whatsapp payment would head to next, it’s Africa. With Facebook Pay already active in 16 African countries and WhatsApp being the top messenger app in more than half of Africa, it’s only a matter of time.

 Source: DataReportal

"My interest is in the future because I am going to spend the rest of my life there. "

-C.F. Kettering

Today like C.F Kettering I’m going to be exploring what the future could look like.

How could Facebook introduce Whatsapp payments to Africa?

I think Justin Norman did a good job describing the possible scenarios that could play out when (not if) Facebook brings payments to Whatsapp in African Countries.

It raises the question – who would make for good partners on the ground once Facebook inevitably turns its eye (and checkbook) towards the continent? Do any startups or fintechs have the scale (yet) that Facebook is invariably seeking in local partners? 

If anyone has the distribution scale in Africa, it’s telcos. To a large extent, M-Pesa is laying much of the same foundation that Jio + Facebook are laying in India. Does an M-Pesa integration with WhatsApp Pay make sense (for Safaricom and Vodacom)? Does that make M-Pesa a prime investment target for Facebook (perhaps emboldened by Safaricom and Vodacom’s recent joint venture to spin M-Pesa out of Vodafone)? On the other hand, should MTN come calling? 

Beyond telcos, Transsion’s [makers of Tecno, Infinix & Itel] activity in Africa is also especially compelling. We have previously discussed their distribution advantage, as Transsion brand cell phones have top market share on the continent. Transsion has tried their hand at a superapp with the launch of PalmPay in Nigeria, which comes preloaded on its phones.  

Meanwhile, PalmPay’s Chinese-backed competitor OPay’s superapp ambitions are built, in part, on their distribution advantage via their parent company Opera, whose web browser is number two in usage in Africa. OPay also claims 40,000 agents throughout Nigeria (Paga, for context, has 25,000). At the same time, some of its “O” services, like ORide, have run into snags, as have other ride-hailing services in Lagos, in particular. ORide has subsequently sold off some of its fleet.

It’s an endless world of possibilities.  In order to move fast and avoid unnecessary regulatory issues, it’d be best Facebook comes in via partnership.

eCommerce Play

Beyond payments, Whatsapp Pay could power Facebook foray into eCommerce. Notably, Facebook and Instagram have Shop features, whilst WhatsApp has a Business catalogue feature, this gives Facebook an ideal playground for e-commerce. As indicated in the announcement post, People will be able to send money securely or make a purchase from a local business without leaving their chat.

Imagine people buying and selling within the apps billions of people already use. For many people in Africa, these Facebook apps make up the “internet” or like Seyi Taylor said, “In many of these markets, Facebook is not just part of the internet, it is the internet. Some people in the developing world aren’t even aware that there is an internet beyond Facebook and Whatsapp.”

What does this mean for existing eCommerce players?

Facebook Pay fully integrated on all Facebook’s apps especially Whatsapp would mean more purchases made on the App, and could mean fewer purchases on sites. Considering the market is very large, it might take a while for this to affect Jumia or Takealot - Africa’s biggest eCommerce players. 

On the flip side, Jumia’s extension into Logistics makes a lot of sense because while Facebook Pay might mean customers not leaving Facebook apps to make purchases, how the product gets to the buyer is also an integral part of the buying experience. 

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