Can WhatsApp’s P2P Payments Become A Meaningful Business?

by Trefis Team
+17.32%
Upside
145
Market
170
Trefis
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Facebook’s (NASDAQ:FB) messaging app WhatsApp is testing P2P (peer-to-peer) payments in India. If successful, the company could potentially expand the feature globally across its 1.5 billion monthly active users. This has the potential to be an extremely valuable business; for example, if 20% of the app’s monthly active users transact $600 each annually, we estimate that it could be worth up to $10 billion if WhatsApp takes just a 0.5% transaction fee from participating banks by leveraging its huge network. We have created an interactive dashboard that shows our underlying forecasts and assumptions related to this estimate. You can modify key assumptions such as percentage of users using P2P payments, average transaction value, WhatsApp’s transaction fee, margins, and valuation multiples to come up with your own valuation estimate for WhatsApp’s P2P payments business. Create your own forecasts, and see whether this business can be meaningful.

 

Significant Upside Globally

An estimated 33% of smartphone users in the U.S. used P2P mobile payments in 2017. Our base case assumes a more conservative figure of 20% for WhatsApp globally. In addition, on average P2P users transacted an estimated $1,900 annually in 2017 in the U.S. Our base case assumes this figure at less than one third of this value ($600) for WhatsApp globally. It should be noted that the figures for the U.S. market are per eMarketer’s forecasts, and not actual historical figures. Finally, we assume that WhatsApp will be able to earn 0.5% of transaction value in fees, which it could potentially charge from banks (it will likely be reluctant to directly charge fees to users). Due to its huge network advantage and Facebook’s backing, WhatsApp could have some negotiating power related to fees. If you have a different view on these parameters and assumptions, express it using our interactive dashboard and share it.

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