Facebook’s WhatsApp messaging app is working on a cryptocurrency that will let users transfer money via WhatsApp, which will not only disrupt the $500 billion global remittance industry but also the global mobile money industry which processes transactions worth an estimated $1 billion daily.
WhatsApp is the world’s largest messaging service (WhatsApp and Facebook Messenger have1.5 billion users worldwide) — thanks to its large customer base in Africa, Latin America, and other emerging markets, including India where it has a 78% market share. WhatsApp is also the most popular messaging app for a lot of these economies’ migrant population as an alternative to the expensive international calls.
WhatsAppPay will disrupt the global remittances industry allowing its WhatsApp users to easily send money across the app.
The global migrant worker economy is a $3 trillion industry that sends home around $500 billion in remittances to support 800 million people in developing and emerging economies. Most of these estimates are conservative given that they don’t include remittances that use unregulated informal channels.
Remittances to sub-Saharan Africa is expected to hit $39.6 billion in 2019 from a forecast of $39.2 billion according to the World Bank. African diaspora contributes to the home-countries’ economies with remittances accounting for 25.9% of Liberia’s GDP. Additionally, remittances ($22 billion in 2017) contribute more to Nigeria’s GDP (Africa’s largest economy) compared to oil revenues ($20 billion).
Sending money to Africa is the most expensive in the world where on average to send $200 to and from an African country costs almost $19, more than 20% higher than the charge for a remittance to any other region. This industry is heavily monopolized by Western Union and Money Gram, which have massive infrastructure (esp. agents) particularly in rural areas.
Riding on its already large user base, a WhatsApp Pay platform will offer the migrant population a much needed easier, cheaper and more convenient alternative to remittances platforms as Western Union, Money Gram, etc. To better localize the product, WhatsApp needs to incorporate local mobile money companies in its platform, for example easily transferring WhatsApp money to M-Pesa mobile payment app, for example, or any other available local mobile money services across different developing and emerging countries.
WhatsApp SIM card for emerging and developing economies will not only disrupt the global remittance industry but also aggregated the heavily fragmented mobile money industry.
There are over 690 million registered mobile money accounts (a 25% increase from 2016) across 90 countries worldwide, making mobile money a leading payment platform in many emerging and developing markets — with sub-Saharan Africa contributing to 52% of all live mobile money services. In 2017, the mobile money industry processed transactions worth $1 billion a day, generating direct revenues of over $2.4 billion, according to a GSMA report.
A WhatsApp SIM card will be especially vital to connect population in these economies with low internet penetration with free WhatsApp and its payment platform. An agency mobile model will ensure WhatsAppPay accessibility in even the most remote and rural areas. These agents will act as the point places where customers will deposit or withdraw money into their WhatsApp Pay crypto wallets.
Facebook’s venture into the remittance industry through WhatsApp, will turn it into the next Alipay — China’s leading third-party online payment solution.
Alipay has over 900 million active users worldwide, with 700 million of them in China. Ant Financial, the Alibaba affiliate that owns Alipay, is reportedly raising $9 billion at a $150 billion valuation in a private funding round — making it the most valuable privately-held tech firm in the world second to Uber, worth around $70 billion. Alipay’s financial ecosystem ranges from wealth management to insurance to lending and credit scores — heavily disrupting the traditional financial sectors. Borrowing from Alipay’s model, WhatsApp can venture into similar verticals — given that most of the developing countries it will be operating in are heavily unbanked.
As more people delete their social media accounts due to privacy concerns, Facebook’s future is no longer in social media but in the ever expanding mobile money industry.
A WhatsApp Payment option that leverages local mobile money services or uses WhatsApp SIM cards to increase its penetration, will not only disrupt the $500 billion global remittance industry, but also the global mobile money industry which processes transactions worth $1 billion daily.