Mark Zuckerberg is relying on a well-worn M&A playbook that has created fortunes for him before to realise the full fintech potential of WhatsApp. The global messaging app owned by the company he controls, Meta Platforms (META.O), has never quite lived up to the hype. Paying $900 million to buy 20% of India’s CRED and bringing in its founder Kunal Shah could help. In some ways, though, the design of the deal may be too clever by half.
CRED’s mobile app rewards its 17 million users for paying their credit card bills on time. They can get cashback, points to redeem on goods and access to events. It’s a members-only service for those with high credit scores. The eight-year-old company also arranges loans and insurance. And Shah is a highly regarded entrepreneur for his success pursuing a small cohort of valuable customers when most companies in India chase low-value scale.
WhatsApp, for its part, has struggled to turn its 854 million-strong user base in India into transacting customers. It processes fewer than 1% of the 23 million monthly transactions passing through India’s homegrown fast payments channel, far behind Walmart-backed PhonePe and Alphabet’s (GOOGL.O) Google Pay, which together account for close to 80%. And the value of transactions WhatsApp processes are one-fifth the value of those CRED handles.
That makes backing CRED and making Shah CEO of WhatsApp a decent decision. At the minimum, Meta will own part of a business that says it has had its first “profitable” quarter. The California-based firm is also buying itself a path to a full acquisition if it wants to make one later.
Whether Shah can translate his success to the masses in India and WhatsApp’s other markets is uncertain, however. Nor is putting an Indian in charge likely to help Meta fight its legal battles with authorities in the South Asian country over data-sharing. Plenty of global firms have Indian bosses and still run into trouble.
Part of Meta’s gamble bets on the Indian regulator’s desire to break Walmart and Alphabet’s dominance over the payments market. But the central bank also worries about U.S. Big Tech hurting competition. Though Meta won’t take a board seat and is capping its stake in CRED by paying partly in ad credits, according to an Economic Times report citing sources, there are already calls to review the deal.
WhatsApp is, after all, buying up a competitor in a roundabout, messy way.
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