– How to Compete in a Saturated UPI Market –
When WhatsApp decided to jump into India’s bustling UPI market, it had one major advantage: over 400 million users, making it India’s most popular messaging app by far. Imagine leveraging that user base to make payments as easy as sending a “Good Morning” forward in a family group chat. Sounds like a winning strategy, right? Except it wasn’t.
WhatsApp’s Grand Entry — and Not-So-Grand Impact
WhatsApp Pay’s impact in the UPI ecosystem turned out to be underwhelming, and not just because of regulatory delays. Established players like Google Pay, PhonePe, and Paytm had already staked their claim in this space, offering users more than just peer-to-peer transfers. They brought cashbacks, rewards, seamless integrations with a wide range of merchants, and additional services like bill payments. In contrast, WhatsApp Pay remained limited in features, ultimately missing the mark.
Why Did WhatsApp Struggle?
The key issue wasn’t just the lateness to the UPI party — it was the lack of a compelling reason for users to switch. People had already formed habits with their existing apps, which had evolved into multifunctional platforms. Without offering a substantial differentiation, WhatsApp couldn’t overcome the inertia of these ingrained user behaviours.
And speaking of habits, here’s the clincher: breaking them is harder than we think. Just like people tried to jump ship from WhatsApp to Telegram during the privacy debacle, many ended up sticking with what they knew best. For WhatsApp to succeed in UPI, it needed a more distinctive value proposition — a lesson for new entrants to remember.
But that’s not all.
A Non-UPI DNA
WhatApp wasn’t just competing against other UPI apps; it was going up against specialised, verticalized apps like PhonePe, PayTM, GPay — platforms with laser-focus on payments. These apps weren’t just juggling multiple roles; they had one job, and they did it well. This highlights a core challenge in the Indian market: unlike in China, where WeChat’s horizontal experience effectively filled multiple voids, Indian users expect depth and excellence in specialised apps.
Also, UPI had evolved five years before WhatsApp Pay even began its rollout. Consumer expectation has matured, and WhatsApp’s basic P2P offering simply didn’t match up to these demands.
The UPI Intent Dilemma
One major technical hurdle for WhatsApp was the way UPI intent works. Essentially, UPI Intent lets a payment initiated in one app hand off seamlessly to your preferred UPI app and then return you to the initiating app once the transaction is done. This setup feels almost native, replicating a smooth, in-app experience without forcing full integration. And WhatsApp underestimated just how intuitive and frictionless this handoff was. It tried to introduce its own native payment flow but failed to add any significant advantages, making its offering feel like an awkward appendage rather than a streamlined feature.
The P2M goldmine
The real UPI goldmine lies in Peer-to-Merchant (P2M) transactions, which make up around 60% of all UPI volume. However, WhatsApp Pay was nearly unusable in this domain. It wasn’t an issue of technical capability — WhatsApp Pay was compatible with all merchants in India. The real issue was visibility and execution.
Where competitors had prominently branded QR codes at merchant counters, WhatsApp Pay’s logo was missing in action. Even though all QR codes function the same way, visual reinforcement at these touchpoints builds trust and brand recognition, making customers more inclined to use those apps. By not establishing a presence, WhatsApp Pay failed to build a top-of-mind awareness that drives users’ instinctive choices at payment counters.
Moreover, minimal visibility of payment features and a poorly designed QR scanning experience left users confused and merchants indifferent. After all, what good is a payment platform if customers can’t find the QR scanner when they’re in the middle of a busy queue?
Regulatory Hurdles and Local Adaptation
And of course, I’m not denying the hard-hitting regulatory challenges that WhatsApp faces. WhatsApp Pay faces ongoing scrutiny from the National Payments Corporation of India (NPCI), which restricted its rollout in stages. Even as late as 2022, it couldn’t roll out to its entire user base, negating the crucial network effect that early expansion could have achieved. Plus, WhatsApp Pay was under pressure for years to meet localised guidelines from the RBI. That’s not an easy position to be in.
Cultural Disconnect
And finally, while WhatsApp tried to localise by hiring an Indian team, it felt like a product built in California rather than Bangalore. From an awkward cashback campaign to assumptions in the onboarding flow that Indians would “just figure it out”, it was clear that WhatsApp hadn’t grasped the nuances of its target market. And this is why we say UX Research is important kids!
Lessons from WhatsApp: It’s Not Just About Being Big
WhatsApp had several factors in its favour: a massive user base, a trusted brand, and seamless integration with its messaging platform. Yet, it didn’t address the core aspects that make a UPI app “sticky.” For example, the app failed to attract merchants or incentivise users beyond basic peer-to-peer transactions. More importantly, there was minimal visibility for WhatsApp’s payment feature, leading to limited awareness and adoption.
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Now, the big question: If WhatsApp couldn’t get it right, how can any newcomer hope to succeed in this market?
What Upcoming UPI Players Should Do Differently
1. Innovate beyond transactions
New players need to ask themselves: Are they here to be simple transaction platforms, or are they ready to create long-term value for users? Over-reliance on cashbacks isn’t sustainable, and offering a unique long-term value proposition is critical. For instance, there’s potential to offer insight-driven statements, which show all transactions as clear, organised summaries. This would especially resonate with younger, tech-savvy users who are used to e-payments and may find value in budgeting or saving insights.
I recently read a paper that revealed a fascinating insight into spending behaviour: consumers tend to spend about 10% more when using mobile contactless payment methods. Why? Because it eliminates the psychological friction of spending money. With UPI payments, it’s easy to lose track of transactions when they’re happening in the background. As someone who has made dozens of UPI transactions in a week without batting an eye, I can attest that it’s a convenience that comes with a hidden cost. It makes sense then to view all transactions as a consolidated, insight-driven spend summary rather than a basic bank statement.
Take the rise of ‘finfluencers’, for example. There’s a growing market for savings and investment tools, yet no UPI player has effectively leveraged this trend. Why not create features that analyse spending habits and suggest smarter saving strategies? This could give an edge to newcomers aiming to capture the attention of emerging earners and investors.
Imagine a UPI app that analyses spending patterns, sets savings goals, or even assists with micro-investments based on leftover cash balances — leverage the “supermoney” app trend. This kind of comprehensive experience would appeal to the younger generation — those born with smartphones in hand — who are not just open to but expecting tech to solve their everyday problems.
2. Don’t be just another UPI platform — DISRUPT!
The goal isn’t just to offer another UPI app. The goal is to be different. ‘Disruption’ has become a fintech buzzword, but in a market this saturated, it’s also a necessity. New players like Pop UPI may come in strong with aggressive cashback offers, but are they convincing users to switch from established giants like PhonePe, Google Pay, and Paytm? Not really. And that’s the challenge: breaking habits takes more than just rewards.
Take Telegram, for instance. When it failed to replace WhatsApp, it shifted focus to become a different kind of messaging app altogether — one centred around channels and broadcasting. Likewise, new UPI players must find and own their niche.
For WhatsApp, being disruptive could have meant rethinking its approach. Instead of embedding a UPI feature directly into the main chat app, WhatsApp could have maybe launched a standalone app, WhatsApp Pay, with a dedicated focus on UPI payments. Imagine the app offering a specialised UPI-first experience, allowing users to enjoy all the bells and whistles of payment apps like exclusive offers, personal finance insights, or intuitive tracking of expenses. WhatsApp could then enable seamless interoperability with its chat app, offering users the flexibility to move between payments and messaging without switching apps. This would make WhatsApp Pay a UPI-focused powerhouse, leveraging the messaging app’s brand while tailoring the experience for payment needs.
Alternatively, WhatsApp had the unique opportunity to become the go-to digital assistant for small businesses. Think of it as a one-stop platform where shopkeepers and merchants can easily manage their books, track sales, and handle digital payments — all within WhatsApp Pay. By focusing on Peer-to-Merchant (P2M) payments, which account for 60% of UPI transactions, WhatsApp could have carved out a niche, addressing the daily challenges faced by India’s millions of small business owners.
The takeaway is simple: being disruptive means recognizing and solving the gaps in existing solutions. It’s about doing what others aren’t and using inherent strengths in unexpected ways.
3. Maintain transparent user trust mechanisms
UPI is driven by the seamless nature of cashless transactions, but users remain cautious about security and privacy. WhatsApp faced this hurdle with ongoing concerns over how data would be used, which created a barrier to adoption. New players need to be hyper-transparent in their communications about how financial data is stored and protected. Introducing data permissions and clear opt-ins could help build the kind of trust that encourages users to give new apps a try.
4. Leverage the shift to cashless payments
As UPI adoption grows, cash transactions are steadily losing ground. What used to be a single ATM withdrawal now gets broken down into 10 or more UPI payments, signaling not just a technical evolution but a shift in consumer behavior. For new UPI entrants, this change opens up an opportunity to embed credit offerings directly within the UPI ecosystem. By harnessing transaction data and employing basic underwriting checks via account aggregators, these players can effectively tap into and expand the credit landscape.
The Path Forward for New Entrants
Let’s be real — users aren’t going to abandon their existing UPI apps just because a new one offers a 5% cashback. And in a world where Amazon Pay, CRED, and Groww are all pushing unique value propositions to niche audiences, new entrants need to differentiate themselves through innovation, targeted value offerings, and trust.
WhatsApp’s failure wasn’t due to a lack of trying; it’s a reminder that even massive user bases can’t guarantee success without clear differentiation and strategic innovation. And as India’s digital payments landscape continues to evolve, those planning to enter the market should take notes.
For the next wave of UPI apps, the takeaway is clear: You need more than just size and incentives. You need to be indispensable to users.
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