Issue 32- On WhatsApp Pay, Cosmetics Consumers, and FASTag

In today's Finshots brief, we will discuss

• WhatsApp Pay's approval to roll out its services in India
• Why people buy more cosmetics during a pandemic
• What the FASTag system is about

WhatsApp Pay is Here

India is one of WhatsApp’s biggest markets. The Facebook-owned messaging service has 400 million users in the country, though it has been struggling to significantly monetize them over the years.

In 2018, the company launched its payment solution, WhatsApp Pay, but immediately ran into problems. Regulatory bodies in India raised a bunch of issues about the way the payment service stores user data. And as a result, WhatsApp Pay has been restricted to catering to only one million users over the last two-and-a-half years. But now, all that is about to change.

A couple of days ago, India’s regulator of retail payments, the National Payments Corporation of India (NPCI) gave WhatsApp approval to roll out UPI-powered payments. Facebook CEO Mark Zuckerberg released a video soon after saying, “Now you can easily send money to your friends and family, just as easily as sending a message. There’s no fee and it’s supported by more than 140 banks.”

And with that, WhatsApp is setting out into a digital payments market that is expected to grow to a whopping $1 trillion by 2023 - nearly 5 times what it is now. However, it’s going to face intense competition from incumbents like Google Pay, PhonePe, and Paytm. As of September 2019, Google Pay had 67 million monthly active users, PhonePe had 100 million, and Paytm had 150 million.

Well, WhatsApp would have probably been able to amass a large user base faster than any of these players did. After all, nearly all its target customers are already using its app to chat with their friends and family. And so, they don’t have any of the starting problems that other standalone apps have to deal with. But the issue is, the NPCI has instructed WhatsApp to expand its service in a ‘graded manner’. So it will only be able to target 20 million users at first. That’s just about 5% of its total user base in India.

And then there’s the other recent announcement by NPCI. In order to prevent monopolies from forming in the digital payments space, the regulator will be instituting a cap on payment apps in order to ensure that no single player can process over 30% of all UPI transactions in a month. Initially, this order may help WhatsApp gain market share from established players. But once they’re allowed to expand their services to more users, it’ll also rein them in from dominating India’s payments space.

The Lipstick Effect

During recessions, economic downturns, or even periods of reduced personal income, consumers want to treat themselves to small luxuries - things that can help them temporarily forget about their financial woes. Now, obviously, they can’t go off splurging on a foreign holiday or a fancy new car when they’re already strapped for cash. But they can loosen their purse-strings for things like a nice dinner, or even premium cosmetics.

In fact, cosmetics was found to be one of the few industries not adversely impacted by the Great Depression of the 1930s. As Estée Lauder revealed, after the recession caused by the dot.com bubble and the 9/11 attacks, they sold more lipsticks. So this whole phenomenon came to be known as the lipstick effect.

And now with the pandemic, we can see it playing out again. The demand for makeup essentials like eyeliners, mascara, foundations and nail enamels are going up. Not lipsticks, though.

According to Godrej Consumer Products, the reason is that women see no point in wearing lipstick if it’s going to be hidden by a mask. However, the company, which makes a range of dyes and hair colors hypothesizes that they may just turn to coloring their hair instead!

Get FASTag

FASTag is a radio frequency identification (RFID) technology that is used by the National Highway Authority of India (NHAI) for collecting toll charges automatically. Through this, any vehicle owner can affix the tag on their windshield, and simply cruise through toll booths in the country. The charges will be deducted automatically from the owner’s prepaid or bank account. And it’s a pretty neat system.

However now, it’s set to be mandatory. Four-wheeler passenger and goods vehicles that were sold before December 2017 will now have to get FASTags before January 2021. Without it, the vehicle owners won’t be able to register the vehicles, avail of third party insurance, or renew their vehicles’ fitness certificates.

According to the government, this step would ensure that 100% of all toll charges are collected digitally, and that vehicles don’t have to waste time or fuel while idling at toll booths.

Unlawful Gains

The Indian market regulator SEBI had asked Reliance Industries to disgorge Rs. 447 crores along with 12% interest on allegedly unlawful gains made from a share sale in 2007. Reliance filed an appeal, but this has now been dismissed. Here’s why.

Data Centre Cluster

Amazon Web Services is set to invest Rs. 207.6 billion to set up multiple data centres in India. Find out more.

Tesla Tequila

On April Fools Day 2018, Tesla CEO Elon Musk tweeted a photo of himself “found passed out against a Tesla Model 3, surrounded by ‘Teslaquilla’ bottles”. Two years later, Tesla has actually launched its own brand of tequila on its website - which is now sold out. Know more.

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-Written by Vedika Agarwal