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  • Writer's pictureJaime González Gasque

The future of digital transactions: Exploring embedded payments in messaging apps


While users enjoy a seamless payment experience, its widespread adoption still faces hurdles.


Messaging apps have taken a significant step in the world of digital payments with the recent partnership between Stripe and WhatsApp, enabling in-chat payments in Singapore.


This move aligns with the prevailing trend of integrating payment services into messaging platforms. However, despite the potential benefits, these embedded payments may encounter challenges in convincing users to adopt them, mainly due to regulatory complexities and the fact that e-wallet apps are already the default payment mode of choice for many. Let’s explore some of these factors and examine what the future holds for embedded payments in messaging apps.


The benefits of integrating payments with messaging apps



One of the primary advantages of embedded payments within messaging apps is the convenience it brings to users. WhatsApp’s integration with Stripe showcases an example of embedded finance, where non-financial services incorporate financial services within the app itself.


Users can now make purchases directly within the app, eliminating the need to switch between separate platforms. This seamless experience not only enhances user satisfaction but also provides businesses with an opportunity to offer more interactive and immersive experiences. At the same time, businesses can seamlessly tie payments to customer profiles, without having to monitor two separate messaging and payment systems.

Furthermore, integrating payments within messaging apps presents an additional revenue stream for providers. Messaging apps typically boast substantial user bases, enabling businesses to tap into a vast pool of potential customers.


WhatsApp does not charge users whenever they make a transaction on the platform, but it is possible that they may introduce transaction fees for businesses utilizing in-chat payments, creating an additional source of revenue.


The challenges of embedding payments into messaging apps


While embedded payments offer numerous benefits, they also come with challenges that require careful management. One significant concern is the increased risk of scams. The seamless nature of transactions within messaging apps provides fertile ground for malicious actors to impersonate users’ loved ones and engage in fraudulent activities.


WhatsApp mentioned that there are no limits on how much a person can transfer in a single transaction, but this may only be limited to payments to verified merchants on their Business platform. If the limit is implemented for all transactions, this raises the need for robust checks, particularly when making payments to unverified merchants or contacts. Striking the right balance between convenience and security is crucial to protect users from potential scams.


Privacy issues also arise when payments are embedded within messaging apps. While WhatsApp stated that transaction data is typically processed through external payment partners, they did mention that they store “limited transaction information to provide users with an accurate transaction history, to comply with financial regulations, and to help prevent fraud and improve payments product experiences across the Meta Company Products.”


Responsible handling of this data is crucial for privacy, especially regarding targeted advertising — on Meta’s other platforms like Facebook or Instagram — based on users’ payment patterns.


Regulatory challenges across different countries also pose another challenge to the availability of payment services within messaging apps. WhatsApp payments are currently limited to specific regions. In Singapore, for example, payments can only be made to registered businesses.


In India and Brazil, users can make payments to family, friends, and registered businesses. However, Meta, the parent company of WhatsApp, faced problems in both countries. Despite India’s massive WhatsApp user base of 487 million, WhatsApp payments are restricted to a maximum of 20 million Indians due to concerns regarding the localization of user data.


In Brazil, Meta faced certain obstacles and had to establish partnerships with local companies before obtaining approval to facilitate customer-to-business payments in the country. This requirement could stem from the government’s aim to safeguard its own payment systems.


Embedded payments within messaging apps have the potential to disrupt existing transaction infrastructure, raising concerns for governments and other companies who may seek to impede their widespread adoption. The stringent regulations surrounding these systems pose challenges, making it difficult for cross-border payments to materialize without greater clarity and understanding.


Moreover, the market dominance of existing e-wallet apps like Grab in Singapore and Google Pay in India presents an additional hurdle for embedded payment solutions in messaging apps. While embedded payments offer enhanced convenience, they face an uphill battle to attract users who are already accustomed to using established e-wallet apps. Convincing users to embrace a new system can be a considerable challenge in the face of existing user preferences and familiarity with alternative options.


The future of payments in messaging apps


As the integration of payments into messaging apps gains momentum, the future holds exciting possibilities for this evolving landscape. Advancements in technology and shifting user preferences are likely to shape the future of payments in messaging apps.

One aspect that holds significant potential is the expansion of use cases and services offered within messaging platforms. While the current focus is on peer-to-peer transactions and business payments, a broader range of financial services could be integrated in the future. This could include lending and investment options, or even seamless integration with loyalty programs offered by banks.


By becoming all-in-one platforms for communication and commerce, messaging apps can position themselves as central hubs for individuals’ financial needs. WeChat — the all-in-one mobile app by Tencent that is used across China, India, and the United States — has already paved the way in this regard. Nevertheless, there is still room for further improvement and refinement of this model.


To remain relevant, traditional banking and financial sectors may need to adapt by forming partnerships with messaging apps and integrating their services. In such collaborations, financial institutions would provide the underlying infrastructure, while the value of messaging apps lies in their familiar user interfaces and convenience of use. This collaboration between traditional financial institutions and messaging apps is likely to foster the development of more innovative and customer-centric financial services in the future.

Given the poor user experience of crypto wallets, integrating wallet management within messaging apps could offer a seamless solution for newcomers to the world of cryptocurrencies. This approach eliminates the need for users to navigate through complex user interfaces. Instead, they can simply type out commands to initiate transactions to a wallet address linked to their contacts, thereby reducing the likelihood of errors and the risk of lost funds.


Telegram currently enables crypto transactions via its Wallet Bot, but currently, it’s still operating in a custodial fashion, where funds that are transferred to this bot are held in a central wallet. While this is convenient for users, it goes against the decentralized premise of cryptocurrencies.


However, if messaging apps can seamlessly integrate with non-custodial wallets like MetaMask while ensuring robust security measures for users’ assets, it has the potential to significantly enhance the user-friendliness of interacting with the blockchain. This integration would empower users to manage their crypto assets more conveniently within the familiar environment of a messaging app.


Embedded payments in messaging apps offer a range of benefits to both consumers and businesses, but it needs to be carefully managed, particularly when it comes to regulatory compliance and safeguarding unsuspecting consumers from nefarious scams.


Written by Gideon Ng


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