The digital payments market is on an accelerated growth trajectory. Improved payments infrastructure, expanding fintech ecosystem, favorable government policies, and rising internet penetration rate, are among the various factors supporting the growth of the global payments market. With the industry expected to continue its rampant growth trajectory over the next five years, more and more businesses including social media giants are entering the segment. Twitter, for instance, announced its plan to launch a payment service as it seeks to become the everything app.
WhatsApp, on the other hand, has a head start in the payments segment. The firm initially enabled payments in chat in India. In 2020, the service was launched in test mode on the Unified Payment Interface for a select few users. However, in 2022, the in-chat payment feature was rolled out to 100 million users. After a successful launch in the fast-growing payments market in India, WhatsApp announced the launch of in-chat payment services for its users in Brazil in April 2023.
As part of the alliance, Stripe Connect and Stripe Checkout have been integrated into WhatsApp. Singaporean consumers can use debit cards, credit cards, and PayNow service to make payments to businesses. For enabling the payments service, WhatsApp has partnered with local businesses such as lifestyle boutique Tye Tye, plant-based butcher Love Handle, and pastry shop Baker’s 13. Going forward, many more businesses are expected to partner with WhatsApp, as the social media giant plans for a wider rollout of the in-chat payment service in Singapore.
The rollout of the payment capabilities in the global market is part of its two-pronged approach. Given the fact that Meta does not charge subscription fees or allow advertisement on WhatsApp, the strategic move into the payments market will enable the firm to earn revenue from its messaging app, by leveraging the 2 billion strong user base in the global market.
Furthermore, the introduction of an in-chat payment facility will also enable Meta to support its social commerce ambitions. In August 2022, Meta introduced an end-to-end shopping experience for WhatsApp users in India, through a strategic collaboration with Reliance-owned JioMart. With the ability to browse products and make payments through the messaging app, Meta is seeking to become a major player in the expanding e-commerce category.
The launch of the payments service in Singapore is also part of the broader strategy of Meta to accelerate its growth in the social commerce segment. In August 2022, Meta made a significant investment in merchant-focused startup Take App.
The expanding presence in the social commerce and payments market is a clear indication that Meta is targeting accelerated growth from two of the potentially high-growth segments over the next five years. Going forward, PayNXT360 expects Meta to further seek payment licenses in other global markets, like what it did in Brazil, and enter into strategic collaborations, like its partnership with Stripe in Singapore, to launch payments services for more of its global user base.
The competitive landscape in the payments market is growing at a rapid rate. While conventional banking institutions are failing to deliver on their growth promises, fintech firms, tech giants, and social media platforms are expanding their roots at a rapid rate in the segment. Apple, for instance, launched a high-yield savings account for its Apple Card users, offering a 4.15% annual percentage yield. This is much higher than what is offered by conventional banking institutions in the United States. Perhaps, this is the reason why the high-yield savings account from Apple attracted nearly US$990 million in deposits in just four days of its launch, according to Forbes.
Alongside Meta, X Corp (formerly Twitter) also plans to launch payment capabilities. In addition to this, Twitter is also making some big changes to its direct message service and plans to launch encrypted DMs before the end of May 2023.
The growing presence of these big tech giants in the payments market means that the competitive landscape is poised to grow at an accelerated pace over the next five years. This will further drive innovation and growth of the global payments industry from the short to medium-term perspective.
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