The Central Bank of Brazil has given permission to the Facebook-owned WhatsApp to relaunch its peer-to-peer (P2P) payments service in the country which allows users to send money to Visa and MasterCard cardholders.
WhatsApp originally rolled out the payments feature in its second-largest market back in June 2020 but Brazil’s central bank quickly suspended the service to scrutinise whether the service meets all the rules on competition, efficiency, and data privacy. The banking regulator said that the services failed to gain the necessary licences.
Brazil was the first country to get a nationwide rollout of Whatsapp’s payments service. However, the requirements to run the service were not met by WhatsApp which led to the suspension just 10 days after it was launched.
WhatsApp also tried to avoid being categorised as a financial service provider by relying on the licences that are already secured by Visa and MasterCard. However, this did not work and the central bank told both the payment processors to stop the money transfer activities through WhatsApp or else they will be fined. WhatsApp had to seek regulatory approval to process payments along with Visa and MasterCard securing new permits to operate with the messaging service provider.
Just after the initial suspension, the central bank introduced its own Pix instant payments platform that allows citizens, companies, and government entities to make instant payments through their mobile phones, online banking, and ATMs.
When the WhatsApp payment service was halted in June 2020, its absence was seen to impact the growth of the central bank’s Pix instant payment service which was yet to take off at that point.
After suspending the service for nine months, Banco Central do Brasil has granted licences to Facebook, Visa, and MasterCard in relation to the usage of WhatsApp for initiating fund transfers among cardholders from Visa and MasterCard under the Facebook Pay programme.
The WhatsApp payments service brings new perspectives of cost reduction for users of payment services, a statement released by the central bank said.
WhatsApp is one of the primary online presence for millions of small and medium enterprises in Brazil and this revamped model will serve as the first step to achieve seamless digital payments among blooming businesses in the country.
The relaunched WhatsApp payment service in Brazil will bring opportunities for small businesses.
The company is making the final preparations to have payments on WhatsApp available in Brazil as soon as possible.
Even after it was made available in the market, users will not be able to make any purchases with it.
WhatsApp’s green light in Brazil is now an opportunity for Facebook to establish its dominant presence in the digital payment space amid strong competition.
Source- Insider Intelligence
This payments service will be a success in Brazil as WhatsApp captures nearly all of Brazil’s smartphone users having 112.8 million users in the country in 2021 according to emarketer forecasts from Insider intelligence.
WhatsApp’s growth in Brazil could make its payments service a hit, especially because Brazilian consumers have adopted digital payments.
However, the central bank’s Pix could pose a challenge to WhatsApp’s entry into stores. It is still unclear whether WhatsApp’s payment service will be able to gain entry into in-store payments which is part of a long-term strategy of Facebook.
Pix builds momentum throughout the country and the Brazilian government already restricted the WhatsApp service to just P2P payments which makes it tough to gain complete control over the Brazilian market. Yet, Pix could also partner with WhatsApp, which expressed interest in working with it, to route payments via its instant payment system. This will minimise the competitive threat and will open a path to in-store acceptance for WhatsApp.