WhatsApp eyes lending feature in India as Amazon rolls out Pay Later

https://techcrunch.com/2020/04/28/whatsapp-eyes-credit-feature-for-users-in-india/

by makaroni1 • 6 years ago

50 52 6 years ago

The headline is actually: "WhatsApp eyes lending feature in India as Amazon rolls out Pay Later to tens of thousands of customers"

Not sure whether this should be amended?

saagarjha• 6 years ago

It probably didn’t fit in the character limit and needs a bit of editing.

jmsflknr2• 6 years ago

Yeah, not the fault of the person who submitted the story, which is fairly informative. I'm assuming one of the moderators would fix it when they see it.

krtkush• 6 years ago

The general risk profile of people is increasing due to job loss in the current pandemic. Is it a wise time to launch a money lending feature right now?

I'm a noob at economics so please ELI5.

netsharc2• 6 years ago

If I were an investor I'd be worried... from a humanity point of view, I'm cheering this, in the developing world the governments aren't helping enough (some would argue, "It's the same in the developed world!") and day-wagers are probably going to starve to death[1]. A sudden line of credit would be a boon to help them survive.

But since a capitalist came up with this, it would not surprise me if the loan terms are horrendous and basically means they will be loansharks with slaves trying to pay off the loan in the future.

[1] https://www.theguardian.com/world/2020/apr/04/i-just-want-to...

beilabs3• 6 years ago

> day-wagers are probably going to starve to death[1]. A sudden line of credit would be a boon to help them survive.

If day wagers stay out of work how can they possibly earn the money or interest required to pay the short term loan? Most day wagers have already exhausted their savings. Debt on top of debt usually means starvation in these countries.

jotm• 6 years ago

slaves trying to pay off the loan in the future

I hope they won't and the gov will side with them.

kburman• 6 years ago

As an Indian, I'm more scared with FB now getting our financial data.

rudiv2• 6 years ago

I've said it before, I'll say it again. And I mean it only 40% facetiously.

Facebook + Jio = Skynet.

john_minsk• 6 years ago

Skynet from the movie? It was military AI. Not sure how these are related.

sand_castles• 6 years ago

What happens if people don't pay ?

Do they fly in people with guns from California ?

The problem was never access to credit, but access to high income jobs.

sameverywhere• 6 years ago

The debt gets sold to local companies that can attempt to enforce it in that province/town, probably for cents on the dollar. It probably gets sold to an aggregate and then collectors bid on it.

Not too different than what happens anywhere in the world.

rapsey• 6 years ago

They hand it over to a local debt collector agency or whatever the local procedures are. Maybe they call the bank and take it out of the persons next pay check.

I disagree that it is a jobs issue. It is a legal issue and what procedures exist for these situations.

nromiun• 6 years ago

How much companies have actually lost in these schemes? Flipkart has been doing it for years now.

beilabs3• 6 years ago

I've been keeping an eye on services After Pay in Australia for years. I often thought about rolling it out in Nepal and other developing countries and then I stopped. I came to the conclusion that there is an even greater amount of risk in countries where such credit is not normally available, a huge lack of capital for most people and families is the norm and decided that this would be a predatory practice. So I stayed away.

With everything happening right now, it's incredibly irresponsible for such a product to be released in a market that is unprepared to deal with the consequences.

Starvation for many families who would avail of this service is a fact. Many have come out and said that they will probably starve long before they contract any virus. Scary stuff. Shame on Amazon and shame on Facebook!

pcr0• 6 years ago

You're saying that an entire country doesn't deserve a new credit service because of a lack of existing credit services in that country.

1. You're ignoring middle class and well-off people in those countries. 2. Access to credit is important for developing economies. 3. Access to credit doesn't imply predatory lending, that's a separate problem in how the creditor runs their business.

beilabs3• 6 years ago

I'm not ignoring them at all.

I know that this service will be abused by those who need quick access to capital and it will ruin many of their lives. I don't support payday lending either, doesn't mean that it's illegal but it sure is unethical to charge high interest rates on low sums.

sreejithr• 6 years ago

"Pay later" services are already there in developing markets like India (Simpl, LazyPay etc)

rudiv2• 6 years ago

Those are on a much smaller scale though, and their target market is mostly formal-sector, whereas Amazon and WhatsApp's initiatives seem to be aiming much wider.

didntknowyou• 6 years ago

there's credit available, just in the form of loan sharks or third tier and above lenders with predatory practices already. very common in developing countries and hard to stamp out but demand is there.

yowlingcat• 6 years ago

Not to defend loan sharks and usury, but the moral conundrum is always interesting. There isn't really any winning here, because if you fail to ethically offer credit products, you're not actually destroying the market demand nor how it is filled. By that I mean you'll get payday lenders and if you don't get payday lenders than you get criminal underworld loan sharks. We take access to credit and the way it smoothes things financially for granted, but not everyone has that luxury. Starvation for many families who don't avail of that service is also likely a fact. Starvation as a result of the second order economic fallout of this pandemic across much of the global south is certainly a fact. Saying shame on Amazon and shame on Facebook might help you feel better, but what's your alternative?

jmsflknr2• 6 years ago

Interesting. WhatsApp currently has no business model. No ads. The app is free. This can be an interesting area to charge users some real money. In India, WhatsApp is already huge -- 400 million users -- so they have a reach that is unparalleled in the world's second largest internet market. And largest open market.

Nextgrid• 6 years ago

WhatsApp's main business model is to infer relationships and social graphs on behalf of Facebook, since people trust WhatsApp with access to their contacts even though they might not trust Facebook.

sdiq• 6 years ago

I am in this group and recently my phone had problems. Moved to an older phone that was within the house. Decided not to give WhatsApp access to my contacts. The same is now basically as good as useless. I can't start a conversation with anyone unless I am replying to a previously shared with message. There is just no way you can input a contact into the message which is certainly a clever way of inferring the social graph. Well, now I am just about to give in to them.

op03• 6 years ago

Here's an example of what a great role WhatsApp plays in India from just a few weeks back - https://www.livemint.com/mint-lounge/features/how-whatsapp-f...

People forget how many of that 400 million are illiterate and waiting to be taken for a ride.

"We can reach everyone therefore we should" mindless characters crawling like termites all over the place.

cryptica3• 6 years ago

Someone should come up with a lending service where they lend you money and you never have to pay back. Instead they make a profit by collecting funding from investors. I think such a service would be very popular.

AdrianEGraphene• 6 years ago

I want to frame this comment and gift it to those whom deserve it most.

cryptica3• 6 years ago

The idea of lending in our current financial system is stupid. Just stupid.

It's like investing in a business except with almost all of the downside if they do poorly and very limited upside if they do well. It's a deceptive economic tool for social control, that's all it is.

The economy would be way better off if we just illegalized lending. Especially lending by banks.

Rainymood• 6 years ago

How would you be able to afford a mortgage?

cryptica3• 6 years ago

I'm a millenial. I already can't afford a mortgage. How will that change anything?

But if they ban lending, it would cut demand to buy properties and would cause a price crash. Then within 5 years, I would be able to buy a house with cash.

imtringued• 6 years ago

Well, it entirely depends on the type of lending. As long as the borrower uses that money to boost his income everything is fine. Car loans are a pretty good example of both wasteful and useful lending. You can drive to work with your car even if the workplace is far away. However, using a loan to buy an SUV or pickup truck doesn't increase your income beyond what you get with the economy car.

agustif• 6 years ago

We had a post in HN about some random App doing this two weeks ago or so.. The author's where whining because they were plugged from the stores.

The guys sent SMS to everyone in your contact list if you didn't pay. LOL

dmix2• 6 years ago

But the local payments body has removed most of the fees they could levy on banks and merchants to make money. The move has resulted in firms exploring other financial services, such as credit and insurance and target merchants to make money.

Ah, unintended side effects that leave citizens worse off at work once again...

Loans could be fine if done properly but the idea of tons of financial tech companies being forced to push loans hard in order to offer their original and far more stable business model swept from beneath their feet is worrying.

enitihas3• 6 years ago

How does that leave citizens worse off? Removing charges from payment makes that comission go to citizens, small businesses and away from the pocket of big corporations. The fact that big business can't make money by charging for payment is not worrying. If the credit offering are not good for citizens, regulations will fix that. Government shouldn't allow everything in the fear that big business will do something even worse.

dmix2• 6 years ago

Of course the citizens will like that its "free" but that doesn't make the costs of operating the financial networks also suddenly free.

Nor is it guaranteed the loans will be feasible enough business to cover expenses for the primary financial networks... Let alone covering any sort of customer service, help fighting fraud and theft, or to invest in expansion to new markets, or improving their software products, cover their own banking fees and insurance risks, pay their workers a decent salary, etc, etc.

The government basically limited access to a potentially massive marketplace that would do wonders for the wider economy, increasing efficacy and benefiting local business (India's economy is terribly inefficient and littered with rules that change every region), and instead of charging for the actual service they are providing they will be forced to push a bunch of debt onto the communities that they don't need (or some other shady monetization strategy like selling data and advertisements or other stuff that may even hurt the original business).

This will also likely further limit the market to a monopoly as it requires massive scale to get the <1% who might have loans, so they can get good enough deals with the banks to lower their own fees to have survivable margins. On top of the main business expenses.

Monopolies are famous for being extremely anti-consumer but still surviving with little competition because they are the only ones big enough to navigate the countless legal, regulatory, and technical hoops required.

Destroying the most basic business model... Even before the companies get off the ground (article says the gov still only granted access to a million customers) sounds like a terrible idea.

Who knows how much the fees could have declined from competition alone? Or whether anyone will even continue investing in it if no model exists.

Just saying the government can write even more rules around the debt will make all problems go away is very naive. Unless your end game is gambling all the pieces will come together before it all crashes or the government running it themselves and/or let taxpayers cover the losses?

Abishek_Muthian2• 6 years ago

I was already immensely concerned over the cognitive hold on millions of Indians by WhatsApp, financial data and debt makes it even worse.

When all it takes is a single forward from your WhatsApp uncle/aunty to undo all the rationale induced in the vulnerable members of the family to protect them against COVID-19, it should be treated the same way as a security vulnerability on a platform is treated; only in this case the vulnerability is limited attention/cognitive biases of the users, nevertheless it's the platform which enables it to be exploited.

I appreciate the steps taken by WhatsApp to limit fake news & misinformation such as limiting forwards; but it is certainly not enough. They need to implement aggressive detection, reporting and banning mechanisms for those who spread even a single misinformation/fake news.

I don't think it's the Engineering effort which stops them from doing that.

mmm_grayons• 6 years ago

They need to implement aggressive detection, reporting and banning mechanisms for those who spread even a single misinformation/fake news.

Two issues with this:

1. This is simply not a realistic standard in India, a nation which lacks the basic level of education of many Western nations. While this is true of a few people in most nations, and while many citizens can't be bothered to check, it helps if some at least have the background knowledge to do their own fact-checking rather than just taking the word of one person over another.

2. The "who decides" problem, best illustrated by yesterday's removal of the medical opinion of two front-line doctors from you tube because it "contradicted WHO recommendations". One man's "fake news" is another man's "front-line reporting".

Abishek_Muthian2• 6 years ago

This is simply not a realistic standard in India, a nation which lacks the basic level of education of many Western nations

2016 US elections showed western education doesn't help much in defending against misinformation campaign.

I'm not denying that filtering fake news is going to hard, but when people are getting killed directly as a result of fake news from a platform[1], democratic process are undermined by misinformation campaigns, everything which needs to be done should be done.

As for YouTube moderation policies, at least there are some policies which we can debate upon.

[1]https://en.m.wikipedia.org/wiki/Indian_WhatsApp_lynchings

manishsharan• 6 years ago

I think it is pretty smart idea. Facebook has recently bought a 10% stake in India's large Telco , JIO. Speaking of risk, Jio is very (horribly) efficient in invading cutomer's privacy as they are datamining literally everything and also oushing in-your-face-advertizing-inserts. Facebook is also equally (horribly) efficient in data mining. So using this data from millions of consumers, they could lower the risk of default. The current default rate for microfinance in India is 2.9%. ( https://www.equifax.co.in/about-equifax/press-releases/-/blo... ) . They could easily reduce this rate using this data. So yeah -- tihs will be really profitable.

treebornfrog• 6 years ago

Not to mention that Jio, the mobile data network, is owned by the richest man in India (1).

The investment was a strategic one too, Facebook could leverage this relationship with Jio (reliance) to keep mining data.

Edit: here's a fantastic thread on the relationship between FB and Jio.

https://twitter.com/iramneek/status/1253305972233105409

(1) https://en.wikipedia.org/wiki/Mukesh_Ambani

WhatsApp eyes lending feature in India as Amazon rolls out Pay Later

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