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Can WhatsApp UPI Take Off?

WhatsApp Pay's challenges highlight the importance of market readiness, features, and cultural fit.

Can WhatsApp UPI Take Off?
Photo by BoliviaInteligente on Unsplash
TLDR
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WhatsApp, with its unparalleled dominance in the Indian messaging app ecosystem, entered the Unified Payment Interface (UPI) market with the potential to revolutionize digital payments. With a user base of over 500 million in India, the messaging giant seemed poised to disrupt a market where established players like Google Pay, PhonePe, and Paytm had already cemented their positions. However, WhatsApp’s journey into the UPI ecosystem has been fraught with regulatory challenges, strategic missteps, and a lack of market readiness, ultimately leading to a performance that fell short of its promise. 

The Grand Entry and its Challenges 

In February 2018, WhatsApp began testing its payment service in India, introducing a pilot program for 1 million users. This trail, in partnership with ICICI Bank, aimed to showcase the seamless integration of payments into the messaging platform. Yet, despite its significant initial momentum, WhatsApp’s entry into the UPI market was anything but smooth. Regulatory concerns, particularly regarding data localisation DNA competition, resulted in the National Payments Corporation of India (NPCI) imposing strict phased rollout conditions. For years, the platform’s expansion was capped, first at 20 million users and later at 100 million, which severely limited its ability to compete in a market that thrives on scalability. 

By the time WhatsApp Pay received unrestricted approval in December 2024 to reach its entire user base, the landscape of UPI had evolved dramatically. PhonePe and Google Pay, commanding a combined market share of over 80% had entrenched themselves as household names. Paytm, too, had carved out its niche with a broad array of financial services. WhatsApp’s late entry into this matured ecosystem meant it faced an uphill battle against deeply ingrained consumer habits. 

Struggles to Establish a Foothold 

WhatsApp’s failure to capture a significant market share can be attributed to a combination of factors. Chief among these was its lack of differentiation. While its competitors offered robust features such as cashback rewards, merchant integrations, and a wide array of financial tools, WhatsApp Pay remained a basic peer-to-peer payment platform. This minimalist approach failed to resonate with a consumer base that had come to expect comprehensive financial ecosystems. 

Furthermore, WhatsApp’s approach to merchant transactions, a crucial segment comprising over 60% of UPI’s transaction volume, was lacklustre. Unlike its competitors, WhatsApp Pay lacked visible branding at merchant counters. While QR codes function uniformly across platforms, the absence of WhatsApp’s logo diminished trust and brand recall among customers and merchants alike. The oversight further undermined its ability to compete in the Peer-to-Merchant (P2M) segment, which drives UPI’s exponential growth. 

The Regulatory and Technical Conundrums 

WhatsApp’s entry into the UPI market was also marked by significant regulatory hurdles. The NPCI’s phased rollout strategy, influenced by concerns over data localisation and competitive fairness, delayed the platform's ability to capitalise on its user base. Additionally, the Competition Commission of India (CCI) investigated allegations of anti-competitiveness practices, including claims that WhatsApp was leveraging its dominance in messaging to gain an unfair advantage in payments. Although the CCI dismissed these allegations, citing a lack of coercion and sufficient safeguards, the scrutiny highlighted the complex regulatory environment in which WhatsApp was attempting to operate. 

From a technical perspective, WhatsApp Pay faced challenges in adapting to the nuances of UPI’s intent-based ecosystem. Unlike its competitors, which seamlessly integrated with merchant interfaces, WhatsApp’s native payment flow lacked the intuitive functionality needed to enhance user experience. The platform underestimated the importance of UPI intent, which allows payments initiated in one app to be completed in another, ensuring a smooth and frictionless transaction. WhatsApp’s attempt to create its payment flow came across as clunky and unrefined, failing to win over users accustomed to the polished experiences offered by Google Pay and PhonePe. 

The Cultural Disconnect 

Despite its massive user base, WhatsApp’s efforts to localise its payment platform revealed a lack of deep understanding of the Indian market. The platform’s onboarding processes, promotional campaigns, and user interface often felt like a product designed in California rather than one tailored for India’s diverse and nuanced consumer base. A notable example was its awkward cashback campaigns, which failed to resonate with users accustomed to the aggressive and engaging promotional strategies of its competitors. This cultural disconnect further alienated WhatsApp Pay from its target audience, making it difficult to establish the trust and loyalty critical for success in the digital payments space. 

Breaking the Duopoly: An Opportunity Too Late? 

The removal of user caps in December 2024 marked a pivotal moment for WhatsApp Pay. With the ability to extend its services to all 500 million of its users, the platform was finally positioned to challenge the duopoly of PhonePe and Google Pay. However, analysts remain sceptical about its prospects. As of 2025, PhonePe held a market share of approximately 47.8%, followed by Google Pay with 37%, leaving little room for competitors. Paytm, the third largest player, accounted for 6.88%, while the remaining market share of roughly 9% was split among over 80 other UPI apps. 

India’s digital payment landscape has seen remarkable growth. From FY 2017-18 to FY 2023-34, digital payment transaction volumes surged from Rs. 2,071 crores to Rs. 18,737 crores, growing at a compounded annual growth rate (CAGR) OF 44%. The value of these transactions also increased significantly, from Rs 1,962 lakh crore to Rs 3,659 lakh crore, at a CAGR of 11%. In just the first five months of FY 2024-25, transaction volumes reached Rs. 8,659 crores, with a total value of Rs. 1,669 lakh crores. 

UPI, the cornerstone of this ecosystem, saw its transaction volume grow from Rs. 92 crore in FY 2017-18 to Rs. 13,116 crore in FY 2023-24, at an astounding CAGR of 129%. The transaction value from Rs. 1 lakh crores to Rs 200 lakh crores during the same period, with a CAGR of 138%. In FY 2024-25 (April-August), UPI transaction volumes reached Rs 7,062 crore, with a total transaction value of Rs. 101 lakh crores. 

 Lessons Learned and the Road Ahead 

WhatsApp’s journey in the UPI market underscores several key lessons for new entrants in the digital payments space. First, the importance of differentiation cannot be overstated. Merely offering basic transaction capabilities is insufficient in a market where consumers expect comprehensive financial ecosystems. Features such as budgeting tools, personalised financial insights, and investment options could have set WhatsApp Pay apart from its competitors. 

Second, the platform’s struggle highlights the critical role of merchant integration. The success of UPI hinges on its utility in everyday transactions, and WhatsApp’s failure to establish a strong presence in the P2M segment significantly hampered its adoption. Visible branding, seamless merchant onboarding, and trust-building measures are essential for capturing this lucrative market. 

Finally, WhatsApp’s experience illustrated the necessity of cultural adaptability. Understanding and addressing the unique needs and preferences of the Indian market, from user interface design to promotional strategies, is vital for building consumer trust and loyalty. 

A Future in Transition 

While WhatsApp Pay’s journey has been challenging, its potential to impact India’s digital payments landscape remains significant. The NPCI’s push to diversify the market and reduce reliance on dominant players presents an opportunity for WhatsApp to innovate and reposition itself. By leveraging its extensive user base and focusing on untapped segments such as rural markets and financial inclusion, WhatsApp could still play a transformative role. 

India’s global digital payment leadership is evident, with UPI now living in seven countries, including UAE, Singapore, Bhutan, Nepal, Sri Lanka, France, and Mauritius. In 2023, India accounted for 49% of the global real-time payment transactions. These developments bolster India’s stature in the global financial landscape, making it a leader in financial inclusion and digital empowerment. 

To strengthen its position in the UPI market, WhatsApp Pay needs a strategic overhaul focused on differentiation. Introducing features such as budgeting tools, bill payment options, and gamified rewards can help attract and engage users. Enhancing merchant integration is equally essential—incorporating visible branding on merchant QR codes, offering dedicated business tools, and simplifying onboarding processes can boost trust and adoption. Improving the user experience through seamless transactions and localized features tailored to Indian audiences is crucial. Furthermore, targeting rural and underserved markets by promoting financial inclusion through educational initiatives and offline payment solutions can address connectivity challenges and expand its reach.


IP Round up

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Written by Shivani and technical support for audio generation by Khushi

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