Less than a week after launch, Whatsapp Pay is suspended in Brazil by regulators

Less than a week after Facebook announced the launch of WhatsApp Pay in Brazil, the country’s central bank (BCB) stopped the payment.

Brazil is the second-largest market for WhatsApp in the world, with more than 120 million active users.

In the statement, BCB stated that the purpose of the decision is to “preserve an adequate competitive environment, that ensures the functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap”. The authorities also requested MasterCard and Visa to stop payment and remittance activities through the app.

The title of the statement is: Nova solução de pagamentos depende de prévia autorização do BC” or “The new payment solution must be approved by BCB  in advance”:

A suspension without presenting further arguments is “an unusual, extraordinary move by the central bank, especially in payments arrangements and technology market,” said Tiago Severo Gomes, a partner at Caputo, Bastos, and Serra and a specialist in fintech and banking regulation.

This decision is definitely a setback for Facebook. It has been dealing with repeated regulatory delays to launch WhatsApp Pay In India, where it has 400 million users. Now Brazil. It is probably confused as well because it must have been in communications with BCB and thought it had the blessing to go ahead. 

The launch of WhatsApp Pay is crucial to Facebook’s e-commerce strategy. In developing countries such as India and Brazil, WhatsApp is the main or only online store service used by many mom-and-pop retailers. Most of the time they use WhatsApp to communicate with suppliers and customers, and the addition of mobile payment is very important for the construction of a closed-loop ecosystem.

Whatsapp is also testing payments in Mexico. Previously, there was news that WhatsApp Pay would be launched in Indonesia, but the Bank of Indonesia, the country’s central bank, responded that it had “not heard of it”.

“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,” a WhatsApp spokesperson said. ”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,” the spokesperson said, referring to Brazil’s proposed instant-payment system.

BCB 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,” the banks said, adding that Mastercard and Visa could face fines if they don’t comply.

PIX, mentioned above, is actually a settlement system similar to UPI in India. BCB announced earlier that the PIX platform had onboarded more than 1000 partners, and the launch was planned for November this year. At that time, all players in the payment field can make real-time payment and transfer through this system. And all the players will also be included in the IPX system, and subject to relevant regulations.

WhatsApp Pay was launched in a hurry when it was “not fully compliant”, which not only seized the opportunity in time but also disrupted the plan of the central bank.

In fact, we described BCB’s attitude towards various fintech in our 2019 predictions for Latin America:

Of course, WhatsApp will not give up easily. The wrestling continues, in a country which counts more than 1 million confirmed coronavirus cases.