Kunal Shah may have expected WhatsApp Pay’s challenges. He didn’t see the username battle coming
Days after Indian fintech entrepreneur Kunal Shah was announced as its new global head, Meta-owned WhatsApp found itself embroiled in a major controversy that the instant messaging platform failed to predict. WhatsApp’s move to introduce usernames that users can use for communication instead of registered mobile phone numbers has run afoul of government and cybersecurity experts in its largest market.
Even before the rollout began, the Indian government asked WhatsApp to freeze the process until consultations on the issue were completed “to the satisfaction of the Government”. Meta was also ordered to provide a detailed explanation of the username feature, supported by relevant documentation, within three days.
Quick answers to important questions
•5 QUESTIONS
The WhatsApp username feature allows users to communicate without sharing their phone number using a unique identifier that starts with the ‘@’ symbol. Users can reserve their username from the app settings, and the feature will gradually roll out later this year.
Authorities worry that the username feature could allow bad actors to create misleading identities without users’ phone numbers being visible, enabling impersonation and fraud.
WhatsApp has multiple layers of defense in place against fraud, including keeping high-profile names for legitimate owners and limiting the new contacts a user can make to minimize impersonation risks.
Users should be aware that they must reserve a unique username and that the feature has not yet been released. They will still need a phone number to use WhatsApp and need to be wary of possible impersonation risks.
Yes, users should be careful as this feature can increase the risks of fraud and impersonation unless effective protection measures are implemented by WhatsApp against these abuses.
Kunal Shah’s first big challenge will be to solve this problem as WhatsApp continues to struggle to make money in India despite having over 500 million users in the country.
Why did Meta choose Shah?
The announcement of Shah as the new head of WhatsApp and Meta’s $900 million investment in CRED came as a surprise to many. But many analysts soon pointed out that the 47-year-old fintech entrepreneur was the perfect candidate to lead WhatsApp, considering a larger part of India’s growing digital payments ecosystem.
Although not an engineer by qualification, Shah developed two of the most successful fintech apps in India: Freecharge, which was sold to Snapdeal and later acquired by Axis Bank, and later CRED.
Passion for WhatsApp Pay
WhatsApp is trying to turn into a super app that includes payment services, just like Elon Musk’s X. WhatsApp launched its UPI-based payments in India in 2018 and despite its absolute dominance in the instant messaging scene, it has failed to make a meaningful impact as a payment platform.
WhatsApp Pay far outpaces market leaders PhonePe (46.2%), Google Pay (32.7%) and Paytm (7.9%) and accounts for less than one percent of India’s digital payments.
By bringing Shah on board, Meta is trying to crack the code, which it has so far failed to do, industry executives say.
“If you look at where WhatsApp is at the moment, they’re in a league of their own when it comes to messaging and it remains a great tool for small businesses to explore commerce, but the breaking leg is payments,” Siddarth Pai, co-founder of venture capital firm 3one4 Capital, told Reuters. he said.
Pai added that Shah’s experience developing consumer-facing payment products from scratch in India made him a logical choice.
Username war
Following the government notification, WhatsApp sought to reassure the Indian government that it has safeguards in place to protect against impersonation and fraud.
A WhatsApp spokesperson said in a statement that they have announced the option for people to reserve their preferred username on the platform. “The username feature is not yet available and will be rolled out gradually towards the end of this year. To protect against impersonation, we have retained the highest profile names, such as public figures, government agencies, celebrities, verified Meta accounts, so they can only be claimed by their legitimate owners, and similar derivatives of well-known names are also retained,” the statement said.
“Users still need a phone number to use WhatsApp, and we’ve built multiple layers of defense against fraud in usernames: Other users need to know the exact username to message you, we’ll limit the number of new people an account can contact, we’ll block repeated attempts to guess someone’s username key, and we’ll have systems in place to detect and remove activity that shows common patterns of impersonation and abuse,” the statement said.
Once the feature is available and “the first time someone sends you a message with your username, we’ll show you if they’re a new account, if they’re your contact, if you have groups in common, and if they’re based in a different country, so you can decide whether to respond,” the spokesperson said.
Key challenges for WhatsApp and Kunal Shah
WhatsApp was founded in 2009 and was acquired by Facebook in 2014, and has always struggled to monetize its user base. WhatsApp’s main source of revenue comes from business accounts that pay the platform to reach their users. However, its scalability is limited and there are concerns about cross-platform data sharing with other Meta applications. Facebook and Instagram have repeatedly expressed concerns about alleged end-to-end encryption.
WhatsApp’s end-to-end encryption has also run into trouble with the government, as the Information Technology (IT) Rules require platforms to track the “original creator” of flagged messages to curb misinformation and cybercrime.
Due to its widespread use in India, WhatsApp has also been exploited by some actors to spread large-scale digital scams, including fake news, hate speech and ‘digital arrest’. WhatsApp has so far failed to meaningfully address such concerns.
With Meta investing in CRED and Shah joining WhatsApp, many people have raised concerns about data sharing between the two platforms. Addressing the issue, both companies said Meta would not have access to CRED customer data and Meta would not sit on the fintech’s board of directors.
