Brazil’s Central Bank Suspends WhatsApp Payments

Just a week post the launch of Facebook’s Whatsapp Payments services in Brazil, it was suspended by the country’s Central Bank. In response to why the Central Bank had to take such a measure even when the Whatsapp officials were in constant touch with the authorities, the bank said the decision was taken to “preserve an adequate competitive environment.” The Brazilian banks have currently notified the Visa and Mastercard to stop facilitating money transfer services through the Whatsapp payments app until further notice. If the companies fail to comply with the order, it can lead to further administrative sanctions and financial penalties.

In the statement released by Brazil’s Central Bank, it also said that the bank didn’t have the opportunity to analyze and comprehensively go through Whatsapp payment before it was rolled out in the market. Around two years ago, Facebook rolled out Whatsapp Pay in India at a smaller scale for Beta testing. It is still waiting for approval for a nationwide rollout from the regulatory authorities. Brazil is the second-largest market for Whatsapp right after India. Apart from Brazil and India, Whatsapp Pay has been Beta tested in Mexico.

Whatsapp has been hoping that Whatsapp Pay would help businesses to accept and send payments as well as help the individuals carry out personal financial transactions. The company had planned to keep its payments services free for individuals but planned to levy a processing fee of 3.99 percent for the businesses. In India and Brazil, Whatsapp has played a crucial role in businesses and is the primary source of an online presence. As per Bloomberg’s survey, more than 5 million merchants from across the globe currently use the business edition of Whatsapp that has some additional features useful for businesses.

The decision by the Brazilian Central Bank to suspend Whatsapp Payments came as a surprise for the company. It is because Whatsapp has been in constant touch with the company. Whatsapp even rolled out Whatsapp Pay at a smaller scale for beta-testing in the country a month earlier. In a statement, Whatsapp said that the company plans to facilitate digital payments for all of its users in Brazil and that the company is committed to working closely with local partners, Central Bank, and regulatory authorities to make it possible. Whatsapp also said in the statement that the company is backing the instant-payment system developed by the Central Bank, which is slotted to be launched in November this year.

Post the announcement of the suspension of Whatsapp Payment services, Brazil’s Central Bank informed Visa and Mastercard to halt enabling money transfer services through the app. The Central Bank did inform that failure to comply with the order can result in hefty fines. The antitrust regulator of Brazil, known as CADE, also declared the suspension of the partnership between Whatsapp Pay and Cielo, which is a local electronic payment company.

As per the announcement made by the antitrust regulator on its site, it mentioned that the combined power of the Whatsapp user database and Cielo’s market share in the field of electronic payment can make it difficult for any new competitor to surface or sustain. The deal made between Cielo and Whatsapp Payments wasn’t presented to the antitrust regulators for evaluation. It is for this reason, the regulator and the Central Bank had to act fast to keep any competition-related concerns at bay.

The Central Bank of Brazil is in the process of evaluating the payment system of Whatsapp and if it presents any possible risk to the country’s payment machinery. The Central Bank is also using the suspension to evaluate if the payment system of the Whatsapp Pay is compliant with the local laws and regulations. The Central Bank said that letting the service start with the approval of the regulatory authority or evaluation by the bank can lead to irreversible damage to the payment ecosystem.  It can trigger concerns related to efficiency, privacy, data protection, and competition. The Cielo also said in a statement that they had suspended their service for now and would keep the shareholders in the loop of any new developments. Whatsapp Payment is one of the key projects that Facebook has been working on for a while and is hoping to roll it out by the end of the year after the Central Bank’s approval.