second chance

Facebook's Shot at India Redemption

After its plan for free internet foundered, digital transactions offer a second chance.
At Closing, May 25th
184.92 USD

After its plan to offer free internet in India was rejected, Facebook Inc. may soon find that the fastest way to consumers' hearts is through their wallets. Digitally.

Its WhatsApp service is preparing to start digital payments in the country, a move that would leverage India's rush to online transactions after November's sudden demonetization, the Financial Times reported. WhatsApp would challenge local players including PayTM, which is backed by Alibaba Group Holding Ltd.

Logged On

Facebook's WhatsApp is the most popular chat app in India

Source: Kepios, Hootsuite, We Are Social, Global Web Index

The service would probably tap into India's Unified Payments System, which is regulated by the Reserve Bank of India and was set up to facilitate the transfer of funds instantly over mobile devices.

More than a third of Indians now access the internet and mobile-phone penetration stands at around 80 percent, with both figures rising rapidly. Yet only 78 percent access the internet at least once per week, according to research compiled by consultancy Kepios.

Facebook copped a lot of flack for trying to offer a free but scaled-down version of the internet in India as part of a program it has successfully deployed elsewhere. With the abolition of large-denomination banknotes forcing Indians to jump into digital alternatives, Facebook may benefit from a concept known as loss aversion.

In their work on the topic, Amos Tversky and Daniel Kahneman discovered that the fear of loss is a more powerful driver of action than the prospect of an equivalent gain. Kahneman went on to win a Nobel Prize in Economics for that research (Tversky died before it was awarded).

With much Indian commerce grinding to a standstill because of a shortage of cash, fear of being unable to perform transactions may be a bigger driver of digital-payments adoption than the prospect of gains from efficiency or ease of use.

It's unlikely any offering would be a major profit contributor for WhatsApp, but it would help achieve what Facebook had hoped for in seeking to provide free web access, which is to get more people online regularly and spur consumers to use its services.

After a humiliating loss last time, Facebook could be setting itself up for a win in India.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Tim Culpan in Taipei at

    To contact the editor responsible for this story:
    Matthew Brooker at

    Before it's here, it's on the Bloomberg Terminal.