Everything looked good in mid-June when Facebook announced that WhatsApp Payments is going to be launched in Brazil. WhatsApp is very popular in Brazil, where it has 120 million monthly active users (MAUs). However, just a week after the rollout Brazilian authorities, in practice the central bank, decided to suspend WhatsApp Payments.
As I wrote in an earlier post, what makes WhatsApp Payments much more interesting than any other payments initiative is its massive user base. Globally WhatsApp has already 2 billion users. The user base combined with Facebook’s resources and know-how could quickly make WhatsApp Payments a popular method for people to send money to each other – and to small businesses.
But that requires that all regulatory hurdles have been overcome in a certain country or region. We know that in India, where WhatsApp has 400 million MAUs, Facebook has been in a long battle with authorities regarding regulations and the payments service has still not been launched there.
That’s why the launch in Brazil was such an interesting surprise and naturally everyone assumed that the Brazilian authorities were okay with the whole thing. Well, apparently they were not.
In its statement, Brazil’s central bank indicated it hadn’t had the opportunity to analyze WhatsApp Payments enough before the launch. The central bank also said it was taking the decision “to preserve an adequate competitive environment in the mobile payments space” and to “ensure functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap”.
The rollout of WhatsApp Payments in Brazil didn’t exactly go according to plan. Image by NR.
Bloomberg also reported the following:
Brazil’s Central Bank said the suspension will let it evaluate any possible risk to the country’s system of payments and to determine whether the payments system meets the necessary rules. Starting the service without the regulator’s green light could generate “irreparable damage to the system, especially what concerns competition, efficiency and data privacy”.
All of this sounds very confusing to me. I can’t believe that Facebook would have announced the launch of WhatsApp Payments and decided to commence actual rollout unless they were absolutely certain they had obtained all the necessary approvals.
So what’s going on? My theory is that some player (or group) in the Brazilian payments/lending ecosystem, with fears of losing profits or control (or both), finally got their message through to the local authorities. Probably by painting horrible pictures of a future where a big chunk of the Brazilian money traffic would be controlled by Facebook and Zuckerberg.
Another possibility is that somebody from the central bank’s PIX initiative finally managed to convince the leadership to pull the emergency break. PIX is the central bank’s own payments service, for which it has secured partnerships with nearly 1,000 industry players. According to the central bank, PIX should be launched in November this year. That would explain why Facebook came out with the following statement:
Our goal is to provide digital payments to all WhatsApp users in Brazil using an open model and we will continue to work with local partners and the Central Bank to make this possible. In addition, we support the Central Bank’s PIX project on digital payments and together with our partners are committed to work with the Central Bank to integrate our systems when PIX becomes available.
Time will tell what the real story was behind the central bank’s decision to suspend WhatsApp Payments. But given all the complexities, economic incentives, and power structures involved, I wouldn’t be surprised if the suspension would remain in force for a long time.