WhatsApp Encryption: The Fintech Possibilities

whatsapp-end-to-end-encryption-explainedWhatsApp, a company wholly owned by social media behemoth Facebook, has just introduced end-to-end encryption in messages. The world’s most popular instant messaging app service has over one billion active users and growing. Reader are likely wondering why WhatsApp starts with encryption. The encryption will protect the valuable and private information users send and receive using the app. More importantly though, this encryption sets a precedent for future use by other parties. Further, if Facebook continues to flirt with financial services made available through their various companies, the fintech community stands to benefit for the long haul. Continue reading to understand Whatsapp encryption explained.

Wait, what's encryption?

Encryption is the ability of a program or device to prevent content from being read by parties without the key. In a normal instant messaging application, the parties with the key are those sending and receiving messages between each other. In the case of WhatsApp, now users can be rest assured that any content shared between each other is entirely incapable of being compromised by any other party, including WhatsApp or police organizations. As long as no one else has the key that security remains true. That is the essence of end-to-end encryption. It’s important to note that this encryption also disallows authorization to this information from third-party apps. 

How does it work in case of WhatsApp?

There are unfortunate limitations to end-to-end encryption. First, it requires all users in the message to be updated to the latest version of WhatsApp and have a device that acknowledges that encryption. Right now, anyone using a previous version of WhatsApp or a device other than Apple iPhone risk having their information compromised. Further, metadata, which is information such as the parties involved in the communication, the timestamp of the message(s), and the location of when they were sent and received are not included in end-to-end encryption. That information is made accessible to WhatsApp and will likely be utilized at the request of state governments in investigations.

Encryption has become a mainstay of internet and wireless use as users demand more privacy. This will continue as users rely more and more on their wireless devices and the corresponding apps to access their financial services. That is not the only reason. It is likely Facebook is testing the waters and that the encryption will be utilized for use far beyond messaging. 

The fact is, encryption works to secure content. It is now up to the companies and their staff specifically handling that data and the corresponding servers to respect that request for privacy. It is important to consider because Facebook has made its fortune and staked its future on the ability to use the billions of user profiles for profitable data farming. All of the likes, shares, and news feeds provide the company with unparalleled personal information that can be capitalized in a fashion that only Google can compete with.

WhatsApp and fintech

Tying fintech to instant messaging apps is nothing new. WeChat, KaoKaoTalk, Line, and other Asian fintechs have already integrated person-to-person (p2p) payment options in their given geographic areas of influence. One of the biggest problems in the traditional financial sector is the fear of fraud and the mischievous attempts of illegitimate persons. It has the effect of slowing down the process of opening accounts, transferring money, and often even inhibiting the ability of taking out loans by individuals. Some of these fears are routed in the users, but the vast majority it is held by governments and traditional banking institutions. Their hesitancy has already allowed traction by the aforementioned companies in Asia.

whatsapp-fintechWhatsApp payments

Encryption is just the first step for Facebook to introduce payment and credit solutions for its users. Its precursor has been the company’s early efforts such as streamlined birthday gift payments amongst Facebook friends. We should pay attention closely as the company continues implementing fintech into Messenger. According to Shane Leonard of TechCrunch, social and finance have failed miserably with the exception of Bloomberg’s online venture; a development that exclusively caters to the wealthy. He credits that success to privacy and security, which each follow-up startup has failed to accomplish for its user base. Facebook has a unique opportunity in the financial services field.

Users provide their most personal information with Facebook; more personal information than even our doctors or insurance providers might have. Users engage with Facebook, and now WhatsApp without out reserve, something traditional banks are drooling over. In concert with Messenger and WhatsApp this allows Facebook to completely circumvent the credit card companies and quite possibly redefine our definition of a credit score and the plastic credit cards we carry with us each day. People talk about Card-linked marketing...what about WhatsApp-linked marketing?

How about 3rd parties?

One powerful interaction for fintech startups is the ability to partner with Facebook’s powerful personal data and offer Facebook’s users financial services, similar to how ads are relayed in a Facebook user’s timeline. Facebook has already attempted advertising in mobile and WhatsApp, proving to be an immense failure compared to the company’s estimates. That said, Fintechs have the ability to partner with Facebook and use WhatsApps’ end-to-end encryption to service users to their specific financial needs, based on the data Facebook receives from its users. 

The move towards encryption illustrates that Facebook respects the privacy of instant messaging. It also proves it can work logistically on a global level. This mirrors closely with the shift toward card-linked marketing. It is not unlikely to envision in the near future that instant messages could be sent and received from user’s personal banking institutions, peer2peer (p2p) loan programs, and even their personal investment brokers.

facebook-paymentsWhat would the future bring us?

The opportunity is now. Although Facebook has been quiet in their move towards financial services, key clues have proven that they are not afraid to devote major research and powerful staff to that division. Their acquisition of several powerful companies, such as the ubiquitous WhatsApp and hiring away powerful individuals like fintech prodigy David Markus from Paypal proves this. What they cannot acquire they will work in concert with. Just like their new Account Kit for Advertisers and the API for developers in Facebook Live, they will provide tools and services for the financial industry to integrate.

A powerful financial API could prove quite successful. WhatsApp encryption in messages proves that they are ready to integrate fintech startups and their services into WhatsApp for superior user experience. This could be a very strong combination when combined with banking APi for fintech developers

Summing it all up

The bottom line is this: Facebook is moving fast in fintech. End-to-end encryption proves that they are going to respect the treasure trove of personal information their user base provides the company. With the global reach and brand awareness of WhatsApp, the fintech world is fast approaching the coming of a messaging app with streamlined payment, credit, and transfer solutions for everyday needs. Various parts have been introduced in a localized way, but never with this much at stake.

The underbanked and the young consumer base - half of which does not own a credit card - will be offered an equal playing field. Fintech researchers like to use the word disruption lightly to describe events changing the fintech landscape dramatically. In this case Facebook’s recent moves threaten the entire financial landscape and it is all for the taking. When they do, it will be unparalleled and seamless. Nothing could better define disruption.


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