WhatsApp has 'bad news' for Amazon, Google and Microsoft on OTPs in India; and what makes it important

Meta's WhatsApp has introduced a new category for international one-time passwords (OTPs) and significantly increased the price for businesses sending such messages in India, according to a report by The Economic Times. This move aims to boost revenue from enterprise messaging services on the platform.
While the price hike is substantial, at 20 times the previous rate, it remains considerably lower than conventional SMS charges for international messages.This strategy positions WhatsApp to attract more businesses to its growing enterprise messaging segment, says the report.
WhatsApp recently launched a new message category called "authentication-international" priced at Rs 2.3 per message. This change will be implemented starting June 1, 2024, impacting businesses in both India and Indonesia.
Impact on International Businesses
Experts anticipate this move to significantly affect the communication budgets of international companies like Amazon, Google, and Microsoft. These companies, according to the report, had been relying on WhatsApp as a cost-effective alternative to the high prices of international SMS in India.
Reasoning Behind the Change
The report quotes Aniketh Jain, founder of customer communications startup Fyno, who explains that the rationale behind WhatsApp's pricing strategy. Many large foreign companies, he says, had chosen WhatsApp as their primary authentication channel due to the significant price difference between domestic and international SMS rates.
Previously, telecom companies charged Rs 0.12 per SMS for local businesses compared to a much higher price of $0.05 (roughly Rs 4.13) for overseas companies. This price disparity created an opportunity for WhatsApp to offer a flat rate of Rs 0.11 per OTP message to all businesses. However, with the new system, foreign companies will now face a higher charge of Rs 2.3 per message.
Jain, as quoted in the report, views the new pricing structure positively. He believes it positions WhatsApp strategically by setting the price point between domestic and international SMS costs. He also highlights the fact that India is the starting point for these new rates, signifying its importance for WhatsApp's enterprise messaging business.
Enterprise Messaging Market in India
The enterprise messaging is a rapidly growing market in India, currently valued at over Rs 7600 crore. This market encompasses various communication channels, including SMS, WhatsApp Business, Google RCS, and push notifications. While over-the-top (OTT) channels are gaining traction, conventional SMS still dominates, holding nearly 90% of the market share. In terms of usage, OTP verification for various purposes, such as application logins, financial transactions, and service delivery, accounts for roughly 80% of all enterprise messaging communication.
What qualifies as international SMS for telecom companies
The high cost of international SMS in India has been a longstanding point of contention between international technology giants like Amazon and Google, and telecom operators like Airtel, Jio, and Vodafone Idea. The Economic Times explains that the issue stems from the lack of a clear definition for "international traffic" and the absence of regulatory oversight on pricing in this area.
Telecom companies classify international messages based on the location of data servers, whereas businesses argue that they are Indian-registered entities with locally generated SMS messages traveling through domestic networks. Industry veterans, as quoted in The Economic Times, believe that linking SMS rates to server location is impractical.
On the other hand, telecom companies maintain that international communication charges are high globally. They argue that India already boasts some of the lowest calling and messaging rates in the world, making the current pricing structure reasonable.
What is WhatsApp's defination
The Economic Times report says that WhatsApp appears to be adopting a similar stance in classifying foreign enterprises for its new pricing scheme. The platform reportedly uses a combination of factors, including location API and the company's corporate structure, to determine whether its parent company is based or publicly listed outside of India.