The Facebook (NASDAQ: FB) owned messaging app WhatsApp could be laying the groundwork for the world’s biggest ecommerce and financial transaction platform and nobody has noticed.

The basis for this platform will be the decision to offer to end-to-end encryption to all WhatsApp users. The apps’ creators Jan Koum and Brian Acton who now work for Mark Zuckerberg, announced the decision in an April 5, blog post. In their announcement and media coverage the two emphasized the action as a defense of privacy against government snooping.

“From now on when you and your contacts use the latest version of the app, every call you make, and every message, photo, video, file, and voice message you send, is end-to-end encrypted by default, including group chats,” the two assured users.

What they did not mention was how the encryption makes WhatsApp far more valuable as a business solution. If the encryption lives up to the media hype, a Wired article even claimed that WhatsApp would not be able to decrypt a message even to comply with a warrant or court order. It could be perfect communications solution for a host of professionals that need client confidentiality including attorneys and accountants.

WhatsApp is now a Data Transmission Solution

It seems to be no coincidence that the encryption was announced shortly after WhatsApp added a feature that makes it possible to share PDF documents over the service. Another recently added feature allows users to use WhatsApp to send PDF documents, photographs, messages and even videos to cloud storage solutions such as Dropbox.

Judging by these moves, it looks like Koum, Acton and Zuckerberg are slowly converting their simple app into a data-transmission service for business and commerce. That makes it more like a high-end encrypted messaging service as Telegram or Viber than a text-messaging service such as Twitter.

The difference is that WhatsApp is available to one billion people, many of whom live in the developing world; not just middle and upper class professionals in Europe and the United States. Koum and Acton have effectively cab given drivers in Mumbai and small business owners in Argentina the same capability as attorneys in New York or journalists in London.

An Extremely Disruptive Ecommerce Solution

Naturally this capability is going to be extremely disruptive, especially when people realize that they can use it for ecommerce. A major purpose would be to mask transactions made in Bitcoin or other means made in an attempt to get around tax or banking laws. That could wreak serious havoc in countries such as Argentina and Venezuela where the government tries to control all money transfers.

An even more disruptive use of an encrypted WhatsApp would be to allow people to connect to ecommerce platforms in other countries. This could let people make purchases without paying sales taxes or even to purchase goods; such as drugs or firearms, that are illegal in their countries online.

One has wonder how long it will be before law enforcement, central bankers and tax collectors try to crack down on WhatsApp. David Cameron’s government already tried to ban the solution in the United Kingdom last year. Her Majesty’s Government backed down after media coverage sparked a popular outcry against the proposal.

Will WhatsApp become a Money Transmission Medium?

The next logical step after encryption is the same one that Apple (NASDAQ: AAPL) has already taken to add a digital wallet to WhatsApp. The encryption, like the vaunted iPhone security; is vital to this step to get people to trust WhatsApp with their financial information.

A major reason why Apple CEO Tim Cook made such an outcry against FBI efforts to force Apple to crack the iPhone was to protect Apple Pay. A payment solution such as Apple Pay will only be used by consumers if they think it is secure.

A digital wallet could also be the key to making money from WhatsApp. The service currently loses money for Facebook even though it has one billion users. If Facebook could create a digital wallet; or add an existing digital wallet such as PayPal’s Venmo to WhatsApp, and charge a small fee say one cent on each transaction it could make a fortune.

A WhatsApp Digital Wallet could be Immensely Profitable

Those fees could quickly add up if Zuckerberg could figure out how to get tens or hundreds of millions of people to use a WhatsApp digital wallet. A major use for such a solution would for immigrants in Europe or North America to remit money to the folks back home. The World Bank estimated that immigrants remitted $414 billion (€363.09 billion) to friends and family in their homelands in 2013.

Such a solution would be both incredibly popular and highly disruptive, particularly if it were combined with something like Bitcoin. We’ve already seen the economic havoc wreaked by the ability of the rich and large corporations to transfer money to tax havens such as Panama. How are income taxes supposed to work if everybody from the Uber driver to the movie star can transfer their money out of the country at the touch of an app?

WhatsApp’s end-to-end encryption could lay the basis for a new world ecommerce and financial transaction platform. It could also become the focus of destructive political controversies when governments realize the capabilities such encrypted communications could give to the average person.

An encrypted WhatsApp could make Facebook one of the most valuable companies in the world. It could also make Facebook one of the most hated corporations in government offices across the globe.


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