Table of contents
Welcome to the 25th edition of The Pattern, where we break down the rumblings from the world of finance, technology, and economy.
Almost half a billion Indians use WhatsApp daily to connect and communicate. While most of us use the app to text and call our friends and family, WhatsApp is one of the biggest social commerce platforms in the country too. Through WhatsApp, many of us order medicines, food, newspapers, and anything else, including clothing and jewelry - usually from our nearby stores.
One of my favorite use-cases for WhatsApp recently has been ordering pet food from stores that constantly update the latest offers on their WhatsApp stories. I just have to send a quick message; my address is already in the chat, the food gets home delivered, and the payment request comes on the app through its UPI integration.
And I’m certainly not the only one. Over recent years, commerce has exploded on WhatsApp. Whether mutual fund houses or insurance companies - almost all consumer facing businesses have found WhatsApp to be one of the easiest ways to connect with their customers. Some banks now have pretty solid WhatsApp banking features that allow you to check balances, request statements, or even checkbooks from a chat window.
WhatsApp is a rare application that’s almost ubiquitous in its adoption in a country where the socioeconomic profile and consumption patterns change every 5 km. This means that it’s not just an excellent platform for one-way communication but potentially ripe for real-time, multi-way commerce.
Big story: Will you order groceries on WhatsApp?
One example of this is the recent JioMart’s integration with WhatsApp. Customers can now browse the entire grocery catalog, place an order for their items and make payment on the app itself - no redirects, no drop-offs, and minimal friction.
Taken from: https://techcrunch.com/wp-content/uploads/2022/08/jiomart-whatsapp.jpg?w=1390&crop=1 This can be game-changing in many ways. First, it provides an exciting business model opportunity to WhatsApp, which missed out on the payments hype due to a delayed UPI launch and cold-start issues. Second, it might be revolutionary for Jio as it can capture an intense grocery market in India without spending a lot on customer acquisition and building separate apps/experiences.
But the most significant impact is that it’ll be a real test of the app’s capabilities to enable more commerce use cases going forward. If this goes well for JioMart, many other companies line up not just to sell their wares through WhatsApp but to make the entire journey from customer acquisition to post-purchase service through the app itself.
Dial F for FinTech
Enter FinTech. An industry where customer acquisition and servicing cost is among the highest. User journeys are often fragmented and highly prone to drop-offs. And there’s more fraud risk than perhaps any other sector. WhatsApp is still a new arena for financial services. Still, it can prove to be the shot in the arm that many legacy financial institutions needed to start modernizing their outreach.
There are already a bunch of experiments underway. Meta (Facebook) has partnered with FlexiLoans and Indifi to enable small business financing through its platform. One of the ways in which this is happening is through an ads-on-EMI program where small businesses can pay for advertising costs on Meta’s platforms in equated installments.
But this isn’t all. Many lenders and FinTechs that FinBox works with are already using our infrastructure to launch no-code credit journeys and fully in-app WhatsApp lending journeys. This is an excellent use-case for the lenders to enable super-fast onboarding for the new-to-credit segment, especially in regions where getting users to download new apps or sign up using complex forms is challenging.
Taken from: https://finbox.in/blog/lending-for-bharat-how-whatsapp-apis-and-sachet-loans-will-bring-credit-to-millions-of-indians/ The next step, of course, is for us to see just how deep enterprises can go in building user-friendly experiences on an app that they already use and love - the core of our Embedded Finance thesis that posits that banking will soon move out of the banks and into the palms of the consumers through apps that they use every day.
My colleague Aparna also wrote an insightful piece on how WhatsApp and API-driven FinTech can improve financial inclusion and access for millions of Indians. You can read it here.
The good news
While we’re on financial inclusion and credit access, it’s worthwhile to mention two data points of good news.
One, lending by banks is growing by 300% year-on-year to approach the fastest pace observed in more than a decade. This is fuelled by a massive expansion of credit on the retail side, which includes a housing loan growth of 16%+, along with equally impressive growth across consumer durables and MSME credit.
There’s also the problem of rising NPAs in the MSME side of things that our CEO Rajat Deshpande analyzed in his newsletter just yesterday. You can read that here.
Second, an analysis by the Reserve Bank of India suggests that Indian NBFCs are getting stronger and better. RBI indicates that more than 45% of NBFCs are now crucial from a financial stability standpoint. At the same time, the loan books and profit ratios have grown better over the years even though there’s some increased stress on the NPA side. Overall, the regulator thinks that the NBFCs will be at the forefront of the distribution of financial services in the coming years, and the sooner they digitize, the better it’ll be.
My colleague Anna wrote a detailed analysis of banking apps and why their UX is weighing them down. NBFCs can perhaps take cues as they start on their digitalization journeys. You can read this piece here.
While there’s enough good news, a lot about the Indian FinTech ecosystem is still uncertain and potentially choppy.
First, the digital lending guidelines released by the RBI have divided the industry, and there’s no clarity yet on how affected companies will deal with it. Industry groups are preparing representations to submit to the regulator, and a bit of back-and-forth is on the horizon.
Second, even as the RBI is debating in public the question of MDR and levying costs on digital payments, the government has said that UPI transactions will remain charge-free. This puts the industry in flux as incentives reduce innovation and even infrastructural participation. We recently wrote about the Zero MDR problem and an incentive issue for open protocols such as AA and ONDC here.
Bottom line: Being in the FinTech trenches is excellent because of the constant excitement, but I feel many founders would prefer the operational monotony to the existential firefighting.
That’s all for me this week. As always, you can find the weekly reading recommendations below.