Brazil’s Central Bank has expressed its willingness to permit WhatsApp Pay to launch in the country provided it overcomes one regulatory hurdle. According to the bank’s president, Roberto Campos Neto, the payment service needs to show proof it can operate safely in terms of data protection in a competitive market.
We are not saying that it is not competitive, we just want them to ask for authorization and to show us how it will work for us to make sure it is competitive,”Roberto Campos Neto
Facebook’s initial attempt to launch Whatsapp Pay in Brazil on June 15 was cut short one week later by the country’s central bank and its antitrust agency, Cade. But 3 days ago, the antitrust agency revoked its initial suspension.
According to Cade, it revoked the suspension after finding that the agreement between Facebook and Card processor, Cielo, did not prohibit new deals with competitors or limit the choice of consumers in the country.
The approval from Cade does not entirely clear the road for the payments service as the Central Bank has not given Visa and Mastercard clearance to work with Whatsapp in the country.
With 2 billion users, Whatsapp is one of the most used messaging platforms in the world, second only to Facebook Messenger which has 2.6 billion users. With 1 billion active daily users, getting Whatsapp Pay to be an accepted payments service globally, or in major markets will open up a significant business stream for Facebook.
India is WhatsApp’s largest market with over 400 million users. While Whatsapp Pay hasn’t been fully launched there, it has, however, been in the trial phase since 2018 when it was rolled out to a select 1 million users. The first phase of its integration in India will reach up to 10 million users, 2.5% of its Indian users, before it moves to the next phase.
After India, Brazil is Whatsapp’s next largest market with an estimated 120 million users. The regulatory challenges WhatsApp Pay faces here are worthy of note, particularly because the country’s Central Bank instituted a rule only last week that upturned the partnership between Facebook, Visa, and MasterCard.
Whatsapp Pay and its long walk to profitability
Whatsapp Pay may face problems with existing regulations, as well as those that are not yet instituted and the curveball can be thrown at any time.
The United States is the social app’s third-largest market with 68.1 million users as of 2019. The number of users is projected to grow to 85.8 million by 2023.
In the States, it will be joining existing competitors like Apple Pay, PayPal, Venmo, Stripe, and Square. Since Facebook Pay is already available in the US, it is very likely that Whatsapp Pay will adopt Facebook’s payment gateway if it launches in the US.
Since FB Pay is already working, the regulatory problems that Whatsapp Pay will face in the US when it eventually launches will most likely be targeted at not restricting competition and other forms of bureaucracy.
The widespread adoption of WhatsApp and Whatsapp Business gives it an edge. WhatsApp Pay may collaborate with other payment gateways other than Facebook Pay in order to operate in other countries.
In Brazil, Whatsapp payments will be made using Facebook Pay, while in India the company partnered UPI to make the payment service available.
Besides India, Brazil, and the US, Mexico is another market of high potential for Whatsapp Pay. Mexico has 77 million Whatsapp users. In October, 2019, Facebook was rumoured to be planning a payment services rollout in Mexico and some other countries. Last June, Facebook Pay was launched in Mexico, and Whatapp Pay may follow soon.
Other markets with high user penetration are the Netherlands (85%), Spain (83.1%) and Italy (83%).
Each country has its set of fintech regulations and they only keep increasing. Digital payments are becoming a more targeted and tightly controlled space by financial authorities all over the world. This is particularly evident in the Nigerian government’s efforts to regulate its digital space and impose taxes on companies like Netflix and Facebook.
Whatsapp’s popularity gives the high probability that a significant amount of money will be transferred through it when it is launched. This will probably continue to lead to new regulations and attempts to control the reach and use of the payment service.
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