Brazil’s Central Bank suspended WhatsApp’s payments service, just a week after it first went live in the country. In a statement, the central bank said that it took the decision to ensure an adequate competitive environment in the payment system market and to ensure an interoperable, fast, secure, transparent, open and inexpensive payment system. The bank is assessing possible risks to the country’s payment infrastructure, and checking whether WhatsApp is compliant with regulation.
The bank said, “The possible start or continuity of operations without prior analysis of the Regulator could generate irreparable damage to the SPB (Brazilian Payment System), notably with regard to competition, efficiency, and data privacy. Visa and Mastercard have also been ordered to immediately stop using the WhatsApp application to initiate payments and transfers. Failure to comply with the order would subject to fines and administrative sanctions for the payments companies.”
WhatsApp had launched its payment services in Brazil on June 15, just a week back. This service was enabled by Facebook Pay, and it offered users to send and receive money by linking their WhatsApp accounts to their Visa or Mastercard debit and credit cards. The users could also link their WhatsApp accounts with local banks like Banco do Brasil, Nubank, and Sicredi. Payments processing company, Cielo was handling all the transactions made on the platform. The Facebook-owned service at the time was not levying any fee to users for sending or receiving money but businesses were supposed to pay 3.99 percent processing fee to receive payments.
This suspension of the instant messaging app’s mobile payments service in the country a week after its rollout is the biggest setback for Facebook as Brazil is the second-largest market for WhatsApp.
WhatsApp was surprised by the Brazillian Central Bank’s decision, as the company had been in regular contact with the authority. WhatsApp had started a small test of the service in the country around a month prior to its launch.
A WhatsApp spokesperson said that they will continue working with local partners and the central bank to provide digital payments for its users in Brazil. WhatsApp plans to use an open business model.
The WhatsApp spokesperson added, “In addition, we support the Central Bank’s own payments service PIX project on digital payments and together with our partners are committed to working with the Central Bank to integrate our systems when PIX becomes available.”
The Central Bank of Brazil recently announced that it will launch its own instant payments system PIX in November.
Some experts have called the Central Bank’s decision an overreaction, whereas others said WhatsApp presented a potential risk in terms of market concentration and privacy.
Facebook also started testing WhatsApp Pay in India, which is WhatsApp’s largest market, about two years ago but is still waiting to receive the regulatory approval. Other than India, WhatsApp has also been testing Pay in Mexico.