Paytm and WhatsApp are stepping on each other’s toes in India

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The Indian mobile apps space is in for some curious crossovers.

On Nov. 03, the country’s largest e-payments firm, Paytm, announced the launch of a mobile chat app called Inbox that will let users transfer money alongside chatting with each other. The app will debut on Android phones, with an iOS version following soon.

“We have realised that besides making payments, our users and merchants also like to communicate with each other,” Deepak Abbot, a senior vice-president at Paytm, said in a statement. “There is a need for social messaging, commerce, and payments seamlessly blending into one another.”

The announcement comes amidst speculation (paywall) that chat messenger WhatsApp was working on a person-to-person (P2P) payments feature, reportedly set for a December debut. Paytm, which is backed by Chinese e-commerce giant Alibaba, currently operates only in India (and in Canada just for bill payments), while Facebook-owned WhatsApp has users in over 109 countries.

Locked in

Smartphone users today depend on phone calls or separate messaging apps to confirm their e-transactions. A platform that combines the facility to transact and the ability to instantly confirm the transaction would, therefore, make life easier.

Such convergence can have a tremendous synergistic effect, explained Anindya Ghose, the Heinz Riehl professor of business at New York University’s Stern school. “Users will increasingly message because of the presence of payments on the same platform, and they will increasingly use payments because of the presence of messaging on the same platform,” Ghose said.

While details of WhatsApp’s payments feature are not yet known, Inbox includes all the usual chat features. Like WhatsApp, the new Paytm platform is encrypted end-to-end, so conversations will remain tamper-proof and, importantly, off surveillance. Inbox also lets users initiate private conversations, create group chats, send photos and videos, share live locations, and play games.

Inbox is part of Paytm’s attempt to lock customers into its ecosystem and spark more monetary activity, Ashutosh Sharma, research director at Forrester Research, told Quartz. But the Indian startup shouldn’t try to do it all, and, instead, focus on its strong suit. ”Paytm should attempt to limit WhatsApp to P2P payments only and build out its business around merchant transactions,” said Sharma. The company has on-boarded over 1.5 million merchants already and aims to raise this to five million by the end of 2017. Its strong offline presence through QR codes could steadily convert into e-transactions if customers and businesses are able to communicate remotely from within the app. 

“Paytm is in pole position in India to be able to do that,” Sharma added, “but it has been surprisingly slow at it.”

On Paytm’s main app, customers can already purchase products, movie tickets, flight tickets, and more. The company also has an established e-commerce business through its arm, Paytm Mall. Its instant messenger, Inbox, is already integrated with these.

“I think Paytm’s direction is to become WeChat of India in the future,” Pavel Naiya, an analyst at Counterpoint Research, told Quartz, referring to the Chinese app that lets users play games, make P2P transactions, make video calls, order food, read the news, book doctors’ appointments, and more. It is, according to FastCompany, China’s “app for everything.”

If that is indeed Paytm’s ambition, it is making the right noises. In May this year, it launched the Paytm Payments Bank, which is part of the Indian central bank’s move to boost financial inclusion in the country. The bank cannot lend money, issue credit cards or give advances, and each account can only have up to Rs1 lakh ($1,540). It can, however, issue cheque books and debit cards—and once integrated with the entire Paytm ecosystem, can potentially turn into the world’s largest digital bank.