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  • Writer's pictureJaime González Gasque

‘It’s a WhatsApp life’: how the messaging app became a critical financial service

A recent six-hour outage for Facebook’s services was irritating for UK users. In other parts of the globe, it disrupted entire economies

In the UK, we associate WhatsApp with group chats, photos and a huge store of questionably humorous reaction GIFs. But in many countries, the low-data messaging app is a lifeline for small businesses, especially during the pandemic.

When telecommunications and banking infrastructure are less than perfect, the ubiquitous app has been key for sending and receiving money. In Kenya, for example, it’s “a WhatsApp life”, says Alice Waweru, regional programme manager at TechnoServe, an NGO that encourages entrepreneurship and poverty reduction through the use of technology.

WhatsApp allowed businesses to survive Covid restrictions and even thrive. And when entrepreneurs faced difficult times, it provided a channel for emotional support, too.

The six-hour outage on 4 October wasn’t just irritating, then, but completely disruptive to every facet of life. It’s no wonder that according to web analysis group NetBlocks, these hours of downtime could have cost the global economy as much as $160m an hour.

Commercial opportunitie

While WhatsApp is popular for businesses everywhere, it’s an especially useful tool in emerging markets. Facebook (now known as Meta) acquired WhatsApp from founders Jan Koum and Brian Acton for an eye-watering $19bn in 2014. While he may not have realised it at the time, Mark Zuckerberg wasn’t just adding a near-omnipresent messaging application to his portfolio – he was buying into a burgeoning fintech tool that blurs social media with commercial requirements.

WhatsApp created powerful inroads for Facebook in the world’s developing markets. Where telecoms infrastructure isn’t up to scratch, WhatsApp’s ultra-low data usage model allows people to communicate easily and affordably. That’s because it doesn’t use telecoms networks, unlike SMS.

Today, WhatsApp has 2 billion users worldwide. In Mexico, 17% of users spend at least six hours a day on the service, according to a recent poll. In India, WhatsApp registered 390.1 million monthly active users in 2020. The figure was 120 million in Brazil.

Phone calls and SMS cost proportionately more for consumers in emerging markets than in developed countries, says Nir Kshetri, professor of management at University of North Carolina-Greensboro. That’s why an enormous slice of the population in many emerging markets relies on WhatsApp alone to text and place phone calls.

WhatsApp is my main work tool. Here in Mexico it is many people’s primary way of communicating

Additionally, in 2013, Facebook launched its ‘Free Basics’ programme – now banned in India, but available in 65 countries as of 2019 – which makes data totally free for internet users, with one important caveat: they can only use Facebook. So when Facebook or Zuckerberg’s other applications are offline, there’s a perception in some countries that the entire internet is down.

With these applications so thoroughly integrated into the everyday lives of so many people, it’s perhaps little surprise that businesses followed suit. In 2017, WhatsApp confirmed rumours that it was working on business-facing applications: first, an enterprise suite that would allow companies with global footprints to engage with consumers via chatbots or live customer service; and second, WhatsApp Business for SMEs.

Such offerings have enjoyed astronomical success among businesses in emerging markets, with 7 million small or micro businesses projected to be using the business-focused applications by 2024.

“WhatsApp is my main work tool,” says Richard Contreras, manager of the La Palmita Hotel in Tulum, Mexico. “Here in Mexico it is many people’s primary way of communicating. My screen time app lets me know that my average time on WhatsApp per day is just shy of two hours: it’s how I communicate with all my staff, suppliers and accountants, as well as my friends and family.”

WhatsApp has become an all-in-one business management tool. For the La Palmita, check-ins and check-outs are confirmed via the application, while maintenance and front desk staff are managed through the group function. It’s also used heavily externally, in getting quotes from service providers for linen, replacement parts and tools, as well as negotiating contracts that are sent, returned and signed, all via the platform.

“It’s basically our main means of communication,” Contreras adds. He says the hotel’s ‘facturas’ – receipts for tax-deductible purchases – are mostly sent via WhatsApp and then forwarded to an accountant via email.

The wider economic impact of WhatsApp

It’s not just WhatsApp’s official business offerings that keep economic life moving. In Uganda, goat farmers turned to WhatsApp group chats to cut out exploitative middlemen who were taking unfair cuts no matter where the farmers went to market. This led to the creation of a ‘Goaters Network’ cooperative, avoiding the fees completely.

In Kenya, a WhatsApp hotline allowed farmers to identify locusts during an outbreak in 2020, helping the government respond quickly with the necessary management techniques in the reported locations. Similarly, in Ethiopia, the ATA government agency is charged with identifying bottlenecks in the agriculture sector of the country; its toll-free SMS system for locust reportage was extended with a WhatsApp capability.

Waweru points to examples in remote coastal regions of Kenya, where some communities have only one shop, meaning entrepreneurs had to travel kilometres to the nearest town to access the goods they wanted to resell. Through WhatsApp, they can take photos of the products they require and forward these on to a distributor in a larger town, who will deliver the goods to their doorstep.

For such regions, WhatsApp is the glue connecting shop owners to bigger retailers. However, there’s also a booming home delivery service emerging with the platform that proved its worth at the height of the pandemic.

At that time, Deliveroo recorded a 99% rise in gross transaction value compared to the previous year. Such specialised delivery apps were crucial for many who were shielding in markets like the UK. In much of the rest of the world, though, it was WhatsApp that helped businesses to adapt. In India, WhatsApp could be used as a kind of virtual shop front while physical buildings were indefinitely shuttered during strict lockdowns.

“I know some entrepreneurs who were badly hit by Covid and had to close their shops,” adds Waweru, speaking about Kenya. “One lady in particular launched her business through WhatsApp, taking photos of nicely packaged maize flour and cooking oil. Whatever people grow – any kinds of foods – you take a photo to show people around you and it’s delivered to your doorstep.”

Elsewhere, micro-retailers have joined forces to set up group chats for businesses in particular neighbourhoods, providing support to one another: for example, raising funds or injecting capital if one business is struggling, or even just providing emotional support during difficult times. And in some cases, WhatsApp allowed customers to join video consultations with pharmacies before arranging for medicine to be delivered.

Little alternative

With the tool so thoroughly integrated in the everyday lives of so many people, this begs a few pressing questions. What’s the alternative? And is it appropriate that one US-headquartered company is so instrumental to the infrastructure so many countries?

At the moment, there isn’t really an alternative to WhatsApp in many economies, aside from returning to high-cost SMS messages. That means the only answer is for rival low-data applications to come to market and win users over – a major undertaking.

And while Facebook tries to frame its approach in developing economies as a form of corporate social responsibility, it’s obvious the “company wants to extract as much valuable data as possible” from its operations there, according to Kshetri. In effect, the economic lives of small businesses in entire countries are reliant on Mark Zuckerberg’s business portfolio, and what’s more, they’re freely handing over their data, too.

It is next to impossible for any home-grown company to compete with Facebook in the future

While many consumers in rich countries know their data is valuable, most new users in developing countries don’t realise that the value of the data Facebook extracts from them is worth more than what Facebook pays to provide services like Facebook Zero, according to Kshetri.

“Also, Facebook’s first-mover advantage and a lot of data means that it is next to impossible for any home-grown company to compete with Facebook in the future,” he said.

What’s certain is that the economic cost of outages like that in October is substantial, although difficult to measure, and that a longer outage could be catastrophic.

“For many, outages mean business activities cannot be carried out, customers can’t engage in economic transactions and they cannot communicate,” Kshetri says.

Meanwhile, in Latin America, Instagram is beginning to take shape as a popular alternative for businesses, adds Juan Carlos Thomas, TechnoServe’s director of entrepreneurship.

The catch? It’s owned by Facebook, too.

WeChat: a model for the west?

WeChat is the third most active messaging application on the planet. The vast majority of its 1 billion registered users live in China, where the Tencent-owned platform has emerged triumphant as the major all-in-one application.

At first, WeChat wasn’t particularly successful. But when it introduced voice messaging capabilities three months after launch in 2011, downloads spiked to 50,000 daily. It was the only app at the time that offered voice, text and photos all in one, a bundle of features that seem almost quaint today.

Now users can access a vast array of services, from the just-for-fun ‘WeChat shake’ (which connects you to another user who’s also physically juddering their device at the same time) to high-stakes financial services and stocks trading.

WeChat wasn’t the first mobile payments app. The dominant service was, and remains, Ant Financial’s AliPay. But WeChat’s social features helped it carve into AliPay’s dominance. WeChat Pay has now conquered 39.5% of China’s mobile payment market.

However, the model hasn’t taken off in western markets. According to a Center for Strategic and International Studies report, there were three main conditions for the meteoric rise of consumer fintech like WeChat in China. Many people had smartphones but not credit cards, so they made the jump to mobile payments easily. Second, there was a very sizeable, underserved population for consumer finance and small business. And finally, regulations were lax.

“The regulatory environment for fintech in China was looser and more conducive to innovation than in the US and in most of the world,” comments Martin Chorzempa, research fellow at the Peterson Institute for International Economics. “Authorities there did not issue any formal rules governing online payments until 2010, five years after Alipay launched – it was very much like a small libertarian paradise in what is generally a more carefully controlled country.”

Still, Chorzempa believes the main hurdles for this model in the west aren’t actually regulatory. “Tech firms can partner with banks and get a basic payments licence in the US that would allow them to do a lot of what Tencent and Alibaba do in China. Instead, it seems just very difficult to break consumer habits of using credit cards, especially with rewards locking in the highest-spending consumers.”

Facebook tried and failed to bring about a ‘super-app’, notes Samm Sacks, China tech expert and cyber policy fellow at the New America think tank.

“The kind of bundling of financial services, messaging, social media, and other kinds of mobile activities that made WeChat into a ubiquitous super-app has not caught on outside of China,” she says. “Remember when Facebook tried to give everyone email addresses? It didn’t catch on.”

Despite WeChat’s ubiquity in China, neither Chorzempa nor Sacks see the super-app model catching on in the west any time soon. Even Alipay, says Chorzempa, hasn’t managed to create a popular chat app outside corporate settings, and consumers in the west seem happy to have Google Pay or Apple Pay functionalities included with their phones rather than all-in-one apps with every feature jammed into a single, probably clunkier application

Written by Tamlin Magee

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