Can WhatsApp Ape WeChat’s China Success, As It Enters Indian Fintech?

WhatsApp announced plans to venture into health insurance and micro-pension in India via tie-ups with leading local players, having piloted last few months. According to its P&C insurance partner CEO, WhatsApp’s reach can prop up the low 4% penetration of health insurance, closer to the world average of 6.3% of GDP. WhatsApp has identified four key areas for growth in India, its largest market with 400 million users, two of these being small business ecosystems and financial inclusivity.

Instant messaging (IM) apps such as WhatsApp, FB Messenger, WeChat are expanding their influence beyond exchanging text messages, sending selfies or locating addresses. IM apps are proving to be bigger than the sum of their parts and being repositioned as cutting edge tools for distribution, digital marketing and service.

In China, WeChat has become a dominant channel of online marketing for insurers. More than 50 carriers use public WeChat accounts to handle inquiries, product introductions, claims and other services. Information on company updates, culture, products, procedures and even regulations are pushed to millions of WeChat followers, substantially reducing promotion costs and improving awareness. China’s insurance market has doubled in the last six years, but penetration is still a tad below 4%, compared to 7.3% in USA and 10% in UK.

Tencent, WeChat’s parent, launched WeSure in late 2017 with a mainland China broking license. WeSure customers find products through services offered in WeChat. Initially, WeSure distributed small-ticket products, offering coverage for mobiles during SIM top-ups and personal accident when buying subway tickets on WeChat Pay. These micro-sized policies helped build user profiles, offering insurance-as-a-service embedded in its lifestyle apps. Given WeChat’s large footprint in China, it developed deep user risk profiles which fed Tencent’s data predictions to significantly reduce loss ratios, benefiting affordability.

At 400 million active users at year-end 2020, WhatsApp has a sizable lead over leading digital platforms in India.

While urban India reports nearly 50% population as regular WhatsApp users, rural India with a lower user base is growing at a faster clip. The younger population are more active users. Some of these user segments are unchartered territory for competition. Another significant advantage for WhatsApp is its partnership with Reliance Jio, Indian telecom’s big disruptor.

Compared with fintech leaders, WhatsApp evidently has a lot of ground to cover. UPI (United Payments Interface), a government developed instant real-time payment system that facilitates inter-bank transactions, reported the following figures for major platforms. WhatsApp entered this segment through its Pay Platform last month. The digital payment market is set to more than double in value to $135 billion by 2023.

For incumbents, profits have been elusive. Paytm, backed by Alibaba Group, booked losses running into hundreds of millions. Walmart’s PhonePe expects to be profitable by 2022. As margins in digital payments are thin, these players are now relying on services such as lending and insurance. It’s not going to be easy to win in Indian fintech.

In China, WeSure saw a surge in the last two years, despite highly competitive Ant Group expanding  market share. Tencent’s WeSure crossed annual premium of $3 billion last year.

WeSure capitalized on an attractive opportunity in micro-health insurance and is fast building an ecosystem (read about WeFit here). WhatsApp will start with micro-pension and health sachet products. It might lack the backing and access to years of ecosystem data that WeSure had with Tencent. But, WhatsApp has forged significant partnerships and remember, WeSure also had to contend with multiple insurers. Whether WhatsApp can edge ahead in India remains to be seen. It has strong differentiators in its consumer base and distribution reach that should stand it in good stead. As it speeds, it will garner vital insights for its pilots in other markets such as Mexico and Brazil, its second biggest market after India.

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