Facebook, Inc. (NASDAQ:FB) has had a very difficult month. Facebook stock is down nearly 10% year-to-date amidst concerns over privacy and the misuse of data. FB is currently dealing with a lot of issues: an FTC investigation, a #DeleteFacebook campaign, lawsuits and growing calls for government regulation — all of which could negatively impact Facebook stock. That might just be the glass-half-empty view of Facebook stock, however. The privacy scandal has helped obscure a move Facebook recently made in India.

India has over 1.3 billion people and may overtake China as the world’s most populous country in the next decade, and Facebook’s apps aren’t blocked in India. India is the world’s fastest-growing major economy, and the number of Indians with smartphones and Internet access is rising quickly.

Facebook has a strong position in the country. FB owns India’s three most downloaded apps: WhatsApp, Facebook, and Messenger. WhatsApp is the country’s #1 chat app, with over 200 million monthly active users.

In February, Facebook entered India’s fast-growing mobile payments market when WhatsApp began beta testing peer-to-peer payments in India. Last month, WhatsApp added payments via QR code.

India’s government supports the idea of a “Cashless India.” Furthermore, the Indian Government banned 500 and 1000 rupee notes in November 2016 in an effort to reduce corruption and tax evasion.

I discussed this last year in an article on Alibaba Group Holding Ltd (NYSE:BABA) and its stake in One97 Communications, which owns India’s biggest mobile wallet, Paytm. Tech companies are shaking up mobile payments in India, and Facebook isn’t the only US tech company entering this market.  Alphabet Inc (NASDAQ:GOOGL) rolled out its own payments app for India, Google Tez, in September.

How can Facebook benefit from India’s digital payments boom?

Facebook’s Digital Payments Opportunity

Mobile payments have boomed in China, totaling over $13 trillion last year. India could be next.

“India’s FinTech environment today is where China was in 2013 on mobile-related metrics,” Citi Research analysts wrote in a recent report.

Last year, mobile payments in India totaled 955 billion rupees, approximately $15 billion. Deloitte thinks this will soar to 32 trillion rupees by 2021 — nearly $500 billion with current conversion rates.

And Facebook will receive transaction fees for all the payments made on WhatsApp. So how much can Facebook earn from this?

We can get a rough estimate by looking at China’s experience. China’s #1 chat app is WeChat, owned by Tencent Holdings Ltd (OTCMKTS:TCEHY). WeChat Pay charges a 0.6% transaction fee for payments in China.

Let’s assume Deloitte is correct and mobile payments in India reach a volume of around $500 billion a year by 2021. If 20% of mobile payments in India that year go through WhatsApp, and WhatsApp charges a 0.6% transaction fee, Facebook would earn an extra $600 million a year.

WhatsApp’s Competitors Respond

Facebook’s competitors aren’t very happy about WhatsApp’s move. On Twitter, Paytm founder Vijay Shekhar Sharma complained about WhatsApp, accusing it of trying to kill off India’s open payments system.

A Bloomberg cites what happened with mobile payments in China, which Sharma is doubtless familiar with, as the cause of this anxiety.  Alibaba’s Alipay still dominates mobile payments in China, but WeChat Pay is its biggest competitor. WeChat Pay has gained market share at Alipay’s expense in recent years.

WhatsApp and Paytm hold similar positions in India: one is the country’s #1 messaging app and the other is India’s most popular mobile wallet.

Chat and mobile payments work well when bundled together. According to Anindya Ghose, a professor of business at NYU:

“Users will increasingly message because of the presence of payments on the same platform, and they will increasingly use payments because of the presence of messaging on the same platform.”

Paytm has responded by adding chat to its mobile wallet app. Google Tez did likewise in March.

However, Citi’s Aditya Menon notes that, “Paytm has tried to build its own chat feed to add-on social, but it hasn’t kicked off well so far.”

How Facebook Stock Benefits

Facebook stock would benefit greatly from WhatsApp’s success in this fast-growing market.

This shift to payments and commerce will help diversify Facebook’s revenue, which depends heavily on advertising. In the past, I’ve called this reliance Facebook’s “biggest weakness.” According to Facebook’s most recent annual report, advertising accounted for 98.25% of its 2017 revenue.

Last year, I also wrote that Facebook could borrow from WeChat’s playbook by earning revenue from in-app payments and commerce. Now Facebook seems to be moving in this direction with WhatsApp, at least in India.

WhatsApp announced in September that it would charge businesses for chatting with users. Facebook also partnered with BookMyShow to allow Indians to receive ticket confirmations using WhatsApp. In November, Facebook partnered with the hotel app OYO to allow users to receive booking confirmations on WhatsApp.

200 million active users might not sound like much in a country of 1.3 billion, but keep in mind that there are only around 300 million smartphone users in the country.

As the number of smartphone users in the country increases, so will the number of WhatsApp users.

This will boost Facebook stock.

As of writing, Lucas Hahn did not hold a position in any of the aforementioned securities.