Why India's Hike messaging app adding payment services matters

Written by Anshuman Jaswal || June 26 2017

Hike messenger, a popular phone messaging service app in India, has recently decided to introduce payment services on its platform. 

The payment service includes both peer to peer payments that do not require bank accounts and use in-app wallets, and bank to bank payments using the UPI platform introduced by the National Payments Corporation of India (NPCI). In doing this, Hike has emulated the services provided by WeChat, a Chinese messaging app owned by Tencent. The latter is also an investor in Hike. Such payments cater to both ad hoc requirements between app users, and special occasions such as birthdays or anniversaries on which people often send cash if they are not able to give a present.

Hike has been able to beat Whatsapp to providing in-app payment services. Whatsapp is a global messaging app service that owned by Facebook and is quite popular in India. It is estimated that the vast majority of smartphone users in India have downloaded Whatsapp, at least twice as many as those using Hike. Whatsapp had promised the introduction of payment services for the Indian market but it has not indicated a timeline to do so.

The Hike app is not the first social media app in India that is following in the footsteps of Chinese social media pioneers. Several mobile payment apps have offered features similar to those offered by the Chinese apps in recent years. The main reason for this strategy is the fact that the Chinese firms are among the world leaders in this market, both in ecommerce, social media and mobile payments. Another important reason is that India and China have similar population size, and the Indian economy is following the Chinese economy when it comes to economic development.

In purchasing power parity terms, the size of the Chinese economy is around 2.5 times that of its Indian counterpart. While this is not as much as the five times that the Chinese newspapers often tout, it still is significantly higher. The GDP growth rates are still quite similar for the two economies, and there are also social similarities that allow Indian social media firms to follow the lead of their Chinese counterparts. But a mistake that Indian firms could possibly be making is to not understand the psyche of the Indian consumer sufficiently before they introduce features from Chinese platforms.

In spite of economic and social similarities, the two countries also have vast differences. India is more diverse, like western Europe, in its culture. It has many more languages and culturally distinct regions than China. China has more cultural homogeneity, a little like the US. So, Indian firms might have to cater to the different requirements of each region within the country differently. 

Another issue that the Indian firms have to contend with is the fact that unlike China, India is an open market when it comes to e-commerce and the social media. There is no Great Firewall to protect Indian companies, which have never really enjoyed any infant industry protection. So Flipkart, an e-commerce platform, has to compete directly with Amazon. Similarly, Hike has to deal with competition from Whatsapp, as mentioned above. This gives much less wriggle room to Indian firms. Recently there has been speculation that Hike is not doing too well because it has stopped revealing its user base numbers. What is widely accepted is the fact that most Hike users are also Whatsapp users, and this is not the case the other way round. Furthermore, Hike also has to compete with existing leaders in mobile payments in India such as Paytm and MobiKwik when it introduces in-app payment services.

Therefore, while it is important that firms such as Hike continue to introduce new services and try to stay ahead of the curve, it is very likely that many Indian social media firms will find the going much tougher than their Chinese counterparts because of the presence of the global social media majors in India. It is difficult for the Indian firms to attain critical mass to compete on an ongoing basis, and it will be interesting for us as observers to witness how many of them make the cut.