If e-commerce is all about buying physical goods online, e-payment is all about paying for such goods online, even if you’re buying at a physical location. Think Apple Pay or Google Wallet meet PayPal. That’s what WhatsApp is rolling out in Brazil this week — the ability to send money directly from within WhatsApp, either to a business or to friends and family. The interesting thing about this is not that Facebook (remember, Facebook owns WhatsApp) is rolling out a payment system. Facebook has known for a while that it needs to do something to supplement its revenue streams. Equally, this fits very naturally with their shopping-mall strategy I discuss above. What’s interesting is that WhatsApp has already done this in India, but with different infrastructure. WhatsApp has about 4x the penetration in India that it does in Brazil. In India, they’ve been working on in-app payments since 2017 with the Unified Payments Interface — an Indian system that transacts about $1 billion per day between Indian banks. So what’s the big deal about this roll-out in Brazil? The big deal is not that it’s WhatsApp, it’s that it’s from Visa. Visa has a program called Visa Direct, which enables both business and person-to-person payments “to 99% of bank accounts in 88 countries”. But if you look at who’s using Visa Direct, until this WhatsApp announcement, it wasn’t anyone you’d ever heard of. This is a huge win for Visa, because it gets them in the game for real — and this has always been where Visa wanted to be. Here’s what Dee Hock, the founder of Visa, wrote in 2005 in his book One from Many (remember, way back then, there was no cryptocurrency, no bitcoin; heck, Facebook was only a year old, and still limited to people at universities):
Any institution that could move, manipulate, and guarantee alphanumeric data in the form of arranged energy in a manner that individuals customarily used and relied upon as a measure of equivalent value and medium of exchange was a bank. It went even beyond that. Inherent in all this might be a genesis of a new form of global currency.
If electronic technology continued to advance, and that seemed certain, two-hundred year old banking oligopolies controlling the custody, loans, and exchange of money would be irrecoverably shattered. Nation-state monopolies on the issue and control of currency would erode…. The vast preponderance of the system would fall to those who were most adept at handling and guaranteeing alphanumeric value data in the form of arranged particles of energy.
That’s where Visa is going, and that’s why this announcement is a big deal. Of course, it gets more complicated. Facebook wants in on the game, too. They’ve already launched their Libra initiative to solve cross-border payments. So, what does this look like in the long term? Visa handles in-country, and cross-border moves from Visa Direct to Libra? I don’t think Visa would be too happy about that. Ultimately, it may not matter much to the consumer — all we care about is ease of transaction (and cost). But, there are trillion-dollar battles going on behind the scenes over who controls the transaction of money.