WhatsApp payments in Brazil may not be as disruptive as you think

Contxto – Just over a week ago, news broke that users in Brazil would be able to complete payments via WhatsApp. Of course, the true mastermind behind this arrangement was Facebook, the owner of the messaging app. But now that the initial excitement has died down, it’s easier to see that not everything that glitters is gold when it comes to this service.

The largest piece of evidence to support this is the Brazilian Central Bank’s recent order to suspend WhatsApp’s payment service. The notice was made yesterday (23) on the grounds of preserving “an adequate competitive environment.”

• Related article: Facebook’s WhatsApp debuts payment service in Brazil

[wd_hustle id=”InArticleOptin” type=”embedded”/]

Do you even fintech, bro?

One issue is that in order to complete transactions via WhatsApp, users must have an account with Banco do Brasil, Nubank, or Sicredi.

It’s not as straightforward as simply having the social media app installed on your phone. So, it’s not like all of WhatsApp’s 120 million monthly active users will suddenly be making transfers through the messaging app.

Moreover, some users are concerned about fraud and security, should their phone get hacked. In those instances who will be accountable? WhatsApp/Facebook? The phone company? The corresponding financial institution? 

Run-ins with the law

Facebook-WhatsApp has also had its fair share of hiccups with authorities in Brazil. 

On various occasions throughout 2015 and 2016 judges in the country ordered WhatsApp to be blocked. The grounds for these suspensions generally rooted in WhatsApp’s refusal to disclose information related to ongoing criminal investigations that were communicated through its system.

You know, the whole debate on the validity of strong-arming tech companies into breaching data privacy to catch criminals.

Meanwhile, in late 2019, Facebook itself also got a finger-wagging from the Brazilian government. Specifically, the social media giant was hit with a fine for more than US$1 million for data misuse.

• Related article: Brazil slaps Facebook with US$1.6 million fine for data misuse

Despite all this bad blood between the tech company and public officials, Brazilians are still quite content in using its messaging service.

WhatsApp has some tough competition

On another government-related note, the Central Bank of Brazil wants to launch its own free payment processing service, PIX, later this year. And unlike WhatsApp where there’s a one to two day-delay in settling a transaction, PIX will reportedly be instant.

But now it would appear that the Central Bank sees WhatsApp as a threat to fair competition and has ordered it to shut down.

In any case, Facebook is also facing steep competition in terms of marketplace dominance through its “Shops” service. In Brazil, it will have to deal with local giant Magazine Luiza, as well as Mercado Libre.

So all things considered, I’m beginning to wonder whether it can disrupt the payment and e-commerce market in Brazil after all. 

Related articles: Tech and startups from Brazil!

-ML