WhatsApp payments launched in Brazil for only 7 days!

Peer to peer (P2P) payment has attracted many players over the years since it was identified as representing a large number of transactions where cash is still preponderant. However, P2P payments still face a business model issue. There are only two options: either the payer is explicitly paying a transaction fee, as is the case with Paypal or with Mobile Money systems, or the system is presented as free for both the payer and the payee, and so far, no satisfactory business model has been found.

For years, the GAFAM have tried to enter this field. Facebook is maybe the most active with attempts to turn Facebook Messenger and WhatsApp into payment applications. However, even if the business case for P2P payments is hard to come by, setting up such services surely bothers established players.

Facebook’s WhatsApp just experienced it in Brazil!

Facebook reaffirmed its intention to offer P2P payments via its WhatsApp platform globally, and, as a starting point made the service available everywhere in Brazil. On June 15th, the system was launched in partnership with Mastercard and Visa along with a set of Brazilian financial institutions. It not only included P2P , but also payments at small merchants, through the WhatsApp Business Application. The system was set to be free for individuals but to charge a 3.99% fee for payments to merchants. “The over 10 million small and micro businesses are the heartbeat of Brazil’s communities. It’s become second nature to send a zap to a business to get questions answered,” says WhatsApp in its official blog. Visa and MasterCard provided their tokenization services thus bringing in their security expertise.

The launch was soon halted when, on June 23rd, Banco Central do Brasil (BCB), the country’s Central Bank “ordered Visa and Mastercard to suspend the start of activities or immediately stop using the WhatsApp application to initiate payments and transfers.” BCB say their motivation is “to preserve an adequate competitive environment, which ensures the functioning of an interoperable, fast, secure, transparent, open and inexpensive payment system,” or, in other words, to protect established Brazilian financial institutions. BCB warned that they could impose fines for non-compliance.

In February 2020, Banco Central do Brasil (BCB) announced the launch of PIX, the Brazilian Instant Payment Scheme, a national instant payment platform allowing to transfer money to any user identified by his/her cell phone number, email or taxpayer identification. The system, made mandatory for all Brazilian financial institutions, is planned to be launched in November 2020.

Mark Zuckerberg has been communicating about using P2P payments since beginning of 2018. The original launching ground was India for WhatsApp version while the Facebook Messenger version was to be launched in the US. Indian regulators only approved the launch of WhatsApp payments in February 2020 but the system is now under investigation by the Competition Commission of India (CCI).