Whatsapp’s Payment App, What’s Happening and What’s Next?

  • INSIGHTS  |
  • 10/07/2020  |
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Whatsapp’s Payment App, What’s Happening and What’s Next?

Just over a week after its launch, Brazilian authorities suspended Facebook’s service saying it represented a threat to competition in the payment system market. But similar apps are on the rise worldwide and they seem destined to become part of everyday life

Touted as a huge step forward in the mainstreaming of digital payments, Facebook’s WhatsApp payment app has been facing pushback from the authorities in Brazil only days after it was rolled out.

The service – which works by linking your WhatsApp account to your Visa or Mastercard credit or debit card and allowing you to authorise transactions by way of a six-digit PIN or fingerprint – allows users to make purchases directly through their WhatsApp chat. There’s currently no commission for private users, while businesses are charged a 3.99% processing fee on each payment made to them.

Facebook’s business model has always been based around monetising users through ads and the data that can be harvested from their accounts: with WhatsApp’s over two billion users, its adoption as a digital payment system would give Facebook access to a completely new and potentially vast revenue stream.

But just over a week after its launch in the country, Brazilian authorities suspended the feature on the grounds that it represented a threat to competition in the payment system market, and said it would use the suspension period to evaluate potential risks to the country’s payment infrastructure and decide whether WhatsApp was compliant with the regulations in force. Under a rule only instituted last week, the country’s central bank also requested that Mastercard and Visa stop enabling payment and money transfers through the app, ordering them to seek its permission to continue to do so and warning them that they could face fines for non-compliance.

Days later, however, there was another unexpected turn of events when Cade – the Brazilian antitrust and free competition watchdog – announced it was revoking the decision to suspend the app.

So what on Earth has been going on?

Mobile payment apps – like China’s WeChat, which has over one billion monthly active users and features WeChat Pay – are on the rise worldwide, and it’s easy to see why: offering a level of convenience and speed that cash or card payments can’t hope to match, they are fast becoming a key instrument for payment service providers. The European Payments Council has come out in support of them, saying that the improved efficiency technological solutions like mobile payments facilitate result in savings and an increase in business volume. And as the payments made in Brazil show, mobile payments are also popular for transactions like remittances, where people transfer money to friends, family and businesses, which is part of Facebook’s plan for the app.

Two sticking points remain, though: privacy and competition. And even though some have pointed out that the suspension occurred just as the Brazilian Central bank is preparing for the November launch of Pix, its own instant payment system, it’s clear that the privacy and regulatory issues inherent in the mobile payment sector remain unresolved. Brazil isn’t the only place Facebook has struggled to gain regulatory approval for its service, and this has prevented a wider roll out worldwide.

For the time being, these regulatory concerns seem likely to remain an issue for digital payment systems everywhere, but it’s equally clear that mobile payment seems destined to eventually become part of everyday life. This being the case, all eyes will be on Brazil to see how the social media giant’s sortie into the sector and its clash with the country’s institutions plays out.

What the eventual reception to mobile payments in a country with a cash culture as consolidated as that of Italy will remain to be seen.

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