In what can be considered a big win for the underdog, homegrown Indian messaging app Hike has released their mobile wallet system before any of their competitors. In a market where numerous players are looking to make a splash, Hike has managed to gain a significant advantage by being the first one there. Hike’s new service will allow both, peer-to-peer (P2P) and bank-to-bank payments (via the UPI standard). However, this raises the question – Why is a social messaging app releasing a mobile wallet? What is the idea behind integrating banking services with social media and messaging app?
Let’s have a look.
India Is Going Cashless
Just until last year, India was a cash driven economy, for the most part. A large portion of India does not have access to traditional banking services. This, coupled with factors such as widespread illiteracy, mistrust of credit cards, etc. meant that the majority of transactions in India were carried out in cash.
All this changed when the government announced its decision to demonetize large currency notes last year. Suddenly there was cash crunch, and people had to turn to alternate methods to conduct a financial transaction. This is where mobile wallets come in. While they had been around for years, they only gained significant traction after demonetization. Mobile wallets saw exploded adoption all over the country. In fact, in December 2016, the government noted a 400-1000% increase in digital transactions after demonetization, with nearly 6.3 million transactions being conducted daily. It is clear that this market segment represents a very lucrative opportunity. If Hike’s wallet service takes off, it could elevate the company to unprecedented heights.
Hike + Mobile Wallet: Match Made In Heaven?
Any mobile wallet lives or dies by the size of its user-base and financial transaction. More users and more participating banks & retailers mean more revenue. Based on this, it makes a lot of sense to integrate a mobile wallet in messaging app. These apps tend to have already a largely established user-base, which can easily be migrated to the wallet as well.
This is exactly the case with Hike as well. Hike has a registered (not active) base of nearly 100 million, along with a reach 16.1% among Android users in India. While Hike’s reach may seem a bit small, it is important to note that they are relatively new to the scene, but are growing rapidly. Launched in December 2012, Hike became the fastest Indian company to cross a valuation of $1 billion and attain “Unicorn” status. They did this in just over 3.5 years. With an estimated 267.1 million smartphones this year and rising smartphone penetration, the field is set for exponential growth. This latest move by Hike can give them an edge in the market, and help them expand more rapidly.
Is Hike A Copycat?
Hike decision to enter the mobile wallet space is highly reminiscent of WeChat in China. WeChat’s incredible success story has been sought to be emulated by many companies across Asia-Pacific. Starting out as a messaging app, WeChat has evolved into a kind of OS in itself, offering features ranging from financial transactions to ordering food online. WeChat now has over 889 million active users as of Q4 2016.
The similarities between the two are clear, but how deep does the connection go? Like WeChat, Hike is continually adding more and more features like video calling, camera filters to be more all encompassing. Their “Blue Packets” gift feature is also a blatant copy of WeChat’s “Hongbao” feature. Both these features allow digital cash gifts which expire after some amount of time.
Tough Road Ahead For Hike
Despite being first on the scene, there is no doubt that Hike faces a tough road ahead. Market leader Whatsapp have also announced their intent to bring a digital payment to their platform in the near future. Whatsapp has more than 200 million active users in India as of February 2017, far more than Hike. They also have an unparalleled reach of 91.7% among Android users, putting them at the top position in India. In contrast, Hike languishes in 8th place. Whatsapp is also the most preferred Instant messaging app by 83% of Indian students, whereas Hike is preferred by only 44% of students. This makes Whatsapp much better suited than Hike to take over the mobile wallet space.
Hike also faces considerable competition from established players like PayTM. PayTM has over 200 million registered used, double than of Hike. It is also the largest mobile wallet in India. In comparison, Hike’s offering is not quite as mature; the service only allows for transactions, bank transfers and phone recharges/bills. Although, Hike is in negotiations with major retailers like Flipkart, Amazon, Ola, Uber and Zomato for integrating its wallet solution as a payment option.
However, Hike does have a unique advantage that no one else has. One of their biggest investors is Tencent, who also owns its arch rival WeChat. With the backing of the most successful social integrated wallet in APAC, they no doubt have the path to success laid out in front of them. For their part, Hike is spending a lot of money on R&D to improve their platform. They recently filed 60 patents for the camera, machine learning, etc., and has recently opened a new office in Bengaluru.
The groundwork is laid for an intense battle. However, only time will tell whether Hike can manage to weather the upcoming onslaught by PayTM, Whatsapp and other competitors.