WhatsApp’s massive Brazillian user base of 120 million would benefit greatly from its latest digital payment feature, allowing users to send money alongside messages. Unfortunately for both the Brazilians and Facebook, Brazil’s Central Bank saw fit to completely block this milestone FinTech feature.
Brazil Blocks WhatsApp Pay
As we noted previously, the internet was not released as a fully-featured HTTP protocol. Some key elements were missing to make it truly future-proof.
One of them is having an integrated payment protocol. We can only imagine how things would have turned out differently, how the FinTech landscape would have looked with such a critical feature embedded into the internet from the get-go.
In the meantime, we must work with patched workaround solutions. As such systems go, WhatsApp seems to be the center of gravity upon which financial services want to attach themselves. Thanks to its enormous user count of 2 billion, befitting a Facebook messenger app, WhatsApp has all the requirements to serve as a global payments platform.
WhatsApp Pay has undergone rigorous pre-deployment testing for at least a year, but only this month was it fully released in certain regions. Enabled by Facebook Pay with its Unified Payments Interface (UPI), one can now send payments to people as easily as chat messages. Unfortunately, outside of issues of fees and payment limits, there is also the most important issue – regulatory compliance.
Brazil’s Central Bank Stops WhatsApp Pay
Barely a week has passed, and the financial authorities in Brazil have awakened to the possible threat a service like WhatsApp Pay would pose to security and privacy. Moreover, the central bank cites concerns over the competition as the primary thrust behind WhatsApp’s suspension.
“…preserve an adequate competitive environment, that ensures the functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap.”
Needless to say, this decision represents a serious blow to Facebook’s global digital payment expansion plans. In conjunction with Facebook’s Libra, which received stiff opposition from governments across the world, blocking 120 million Brazilian users from using WhatsApp’s payment feature is a severe setback. One would think that regulatory issues would have been resolved well ahead of deploying the service.
According to Tiago Severo Gomes, a Brazilian FinTech expert and partner at Caputo, Bastos and Serra, the central bank’s decision is somewhat inappropriate. He called it:
“…an unusual, extraordinary move by the central bank, especially in payments arrangements and technology market.”
Other insiders are suspicious of the decision as well. Carlos Daltozo, co-head of equities at Eleven Financial, framed the oddity of such decision in more precise terms:
“It is a bit odd that the central bank decided to suspend WhatsApp as the regulator is already able to oversee all market participants which joined WhatsApp.”
The Real Reason Behind Brazil’s Suspension of WhatsApp Payments
In addition to Brazil’s central bank blocking payments from Visa and Mastercard to WhatsApp — Brazil’s antitrust organization, CADE, preemptively blocked Cielo to provide payment services to WhatsApp a day ago.
“According to the assessment by CADE’s General Superintendence, Cielo has a high market share in the Brazilian market of payment certification. Besides, WhatsApp has millions of users in Brazil, which ensures significant market power upon its entry.”
Another massive blow as Cielo is the biggest credit and debit card operator not only in Brazil but in entire Latin America. More interestingly, Brazil’s central bank is set to launch its own digital payment system dubbed Pix. Therefore, the central bank itself is in direct competition with WhatsApp, as a governmental body of the Ministry of the Economy.
All blocked parties, from WhatsApp’s spokesperson to Visa and Cielo, issued conciliatory statements ensuring that issues will be resolved by working with “local partners” and continuing the development of instant payment systems. What that means for the future of WhatsApp Pay in Brazil is currently unknown.
It looks like WhatsApp Pay was accelerated ahead of Pix, which is set to be released in November this year. Do you think it is appropriate for central banks to serve as direct market players? Let us know in the comments below.