- In a statement sent to LABS, WhatsApp said that it is committed to final preparations to “make WhatsApp payments functionality available in Brazil as soon as possible”;
- The Bank Central said that it believes that the licenses granted may bring new perspectives of cost reduction for users of payment services.
On Tuesday, the Brazilian Central Bank granted a payment initiator license to Facebook Pagamentos Brasil, the company’s payments subsidiary in the country. At the same time, the Central Bank authorized two domestic payment schemes classified for transfers, established by Visa and Mastercard. These authorizations are related to WhatsApp’s usage for initiating funds transfers among cardholders from Visa and MasterCard under the Facebook Pay program. In other words, WhatsApp Pay (re)launch is closer.
In a statement sent to LABS, WhatsApp said that it is committed to final preparations to “make WhatsApp payments functionality available in Brazil as soon as possible”.
The regulatory approval comes months after the Central Bank launched its own instant payments system, called PIX, which has since been widely adopted.
After initially trying to avoid becoming a financial services company in Brazil and seeking to piggyback on Visa and Mastercard’s existing Central Bank licenses, WhatsApp surrendered to regulatory pressure, obtaining formal approval as a payments initiator using Visa and Mastercard as processors.
Both card networks also had to obtain new permits to operate with Facebook’s messaging app, which itself will be regulated by the Central bank.
Still, WhatsApp is only allowed to make peer-to-peer (P2P) payments, not involving merchants (P2M), unlike the free PIX service, which can be used to pay businesses and individuals. Facebook is still seeking approval to operate with merchants. Currently, the agreement for the use of Facebook Pay has only Cielo as the partner acquirer and, according to market executives, the Central Bank wants other companies in the sector to participate in this arrangement before authorizing its operation.
Unlike transfers of funds between accounts, payment by credit card involves the inclusion of a series of additional data from tenants, such as the bank address, information that is relevant for payment companies, who can use it for commercial strategies.
Visa explained to LABS that “payments via WhatsApp rely on the capabilities of Visa Direct solutions, which provide fast transfers through Visa’s global network, and Visa Cloud Token security, which protects and removes confidential information by converting data tokens and securely storing them. “
According to the president of Mastercard Brasil and Cone Sul, João Pedro Paro Neto, the transfers of funds through WhatsApp should start to work in Brazil in the coming weeks. He avoided making projections on the speed of adoption of WhatsApp for transfers but said that two characteristics of the model should make it competitive: fraud prevention mechanisms and the possibility of reversing transactions, which does not exist in the PIX. “And it also has the convenience of making transactions without having to enter another application,” said the executive to Reuters.
The Bank Central said that it believes that the licenses granted may bring new perspectives of cost reduction for users of payment services.
Launched, and then suspended –WhatsApp Pay trajectory in Brazil
WhatsApp Pay was launched on June 15, 2020, in Brazil, the first market to test the novelty. The service, however, was suspended days later by the Central Bank and the Administrative Council for Economic Defense (Cade).
The feature would use Facebook Pay, the payments service launched by WhatsApp owner Facebook in 2019, and that provide a way to make payments across the company’s apps. At the time of the first launch, WhatsApp’s service partners were Banco do Brasil, Nubank, Sicredi, and Cielo, a card payment processor.
Initially, the payment feature required bank accounts and depended on Cielo to process transactions. Individuals would pay no fee while companies would pay 3.99% of sales to the service – a fee considered high by the market, since today, a debit transaction costs an average of 0.90%, and a credit transaction 1.7%, in the country. In addition, Visa and Mastercard were compatible payment arrangements. Gradually, more banks and other partners would be added to the scheme.
In July last year, however, Visa and Mastercard filed a request for a “transfer arrangement” model at the Central Bank. That means that WhatsApp would operate as an initiator – the license granted today –, and generate tokens but would not process transactions; this will be the responsibility of the app partners, who send these tokens to Visa and Mastercard.
It’s not clear if the fees ventilated in June will continue the same with the service’s re-launch.
In November last year, WhatsApp started its payments service in India after it received approval from the country’s leading payments processor to roll out the much-delayed system. Before that, WhatsApp, which counts India as its biggest market with more than 400 million users, had been running a peer-to-peer payments service with limited users for over two years, awaiting regulatory approvals. To enable the service, the company partnered with five Indian banks, including State Bank of India and Jio Payments Bank.
It is also known that the company requested authorization to operate its payments service in Mexico too.