WhatsApp is the secret sauce in the deal between Facebook and Reliance Jio

• Facebook has bought 9.9% in Reliance Jio for $5.7 billion.
  
• The bigger reason for the buy-in is how WhatsApp Pay and Reliance Retail can use this partnership to help each other out.
  
• The payments platform can use Reliance’s massive network of offline stores to monetise its data, while Reliance can use the ‘household’ name to finally yield success with a seamless payments system.
  

Everyone is excited about the deal between Facebook and Reliance Jio in hope that it will result in a new ‘super app’ for India. However, the partnership between Facebook and Reliance Jio has a few more layers than what is visible at first glance.

The secret sauce to this deal is the potential for Facebook’s payment solutions — WhatsApp Pay. And, this is the reason why Mark Zuckerberg is paying top dollar for a stake in Mukesh Ambani’s Reliance Jio.

“Our goal is to enable new opportunities for businesses of all sizes, but especially for the more than 60 million small businesses across India,” said Facebook’s chief revenue officer, David Fisher, and the VP and managing director of India, Ajit Mohan in a post.

Zuckerberg’s social network has bought a 9.9% stake in Reliance’s telecom venture for $5.7 billion. However, the second richest man in India — Mukesh Ambani — also owns the country’s biggest retail chain, Reliance Retail. It will now be a force of power to ensure that WhatsApp Pay has a chance of success in the Indian market despite being such a late entrant.

“PayTM, PhonePe and other players will be impacted. They don’t have as much e-commerce as these guys will have. That will make a big difference,” Vikram Sud, an independent director at DBS told Business Insider.

Retaining employment at brick-and-mortar stores rather than wipe it out
“This is an amazing partnership on the payments side. Whatsapp Pay did not have the commercial sides of it as Whatsapp was trying to creep into the business. Now, between Whatsapp, Instagram and Facebook — all the commerce can be done through Whatsapp Pay,” said Sud.

Jio’s plan to pull all kirana stores and combine it with this payment mechanism will be a massive competition to Amazon and all other e-commerce players. You will get delivery from local stores while also helping them retain their employment unlike the advent of Amazon and Walmart, who have been chipping away at the brick-and-mortar business.

“By bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience,” said Facebook.

And that’s the play that global IT giant is primarily aiming for, according to a senior industry analyst. They weren’t able to monetise it but that doesn’t change the fact that they're sitting on a huge pile of data. This is something they will now be able to leverage and monetise by using Jio Mart's reach.

It’s a win-win situation for Ambani and Zuckerberg
“In my mind, Whatsapp Pay and Jio money will all hopefully get rolled into one. It will just make it quicker since there is nobody in India that doesn't have WhatsApp,” said Sud.

WhatsApp has been testing its payments platform in India since 2018. It was only available to a million users under a partnership with ICICI Bank.

However, the concern for policymakers was whether not it will be responsible to allow a social messaging app — known for being a vehicle of fake news or what’s more commonly called the ‘WhatsApp University’ — to also integrate payments into its platform.

In February this year, two years after the company’s first trial, WhatsApp finally got the approval to roll out its digital payment service in a phased manner. In the first phase, it will offer its payment services to 10 million users in the country.

See also:
Facebook’s investment in Reliance Jio boosts RIL share value by ₹50,000 crore

Here's why Facebook's Mark Zuckerberg is paying top dollar for a stake in Mukesh Ambani's Reliance Jio