Brazilian Authorities Suspend WhatsApp Payments
(Bloomberg) -- Brazil’s Central Bank and antitrust regulator suspended Facebook Inc.’s WhatsApp messenger payment features in the country, the app’s second-biggest market with more than 120 million users.
The bank decision aims to “preserve an adequate competitive environment, that ensures the functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap,” the monetary authority said in a statement on its website. Bank authorities requested that Mastercard Inc. and Visa Inc. stop payment and money transfer activities through the app.
Meanwhile, Brazil’s antitrust regulator, known as Cade, said on Wednesday it is suspending WhatsApp’s partnership with electronic payment company Cielo preemptively. According to an statement on the regulator’s website, the vast WhatsApp user database coupled with Cielo’s high market share in payments could prove too high a barrier for any new competitors. Since the deal wasn’t presented for evaluation, regulators needed to act fast to avoid competition concerns, the statement read.
A suspension without presenting further arguments is “an unusual, extraordinary move by the central bank, especially in payments arrangements and technology market,” said Tiago Severo Gomes, a partner at Caputo, Bastos and Serra and a specialist in fintechs and banking regulation.
The decisions are a setback for Facebook, which introduced WhatsApp’s payments system in Brazil earlier this month after testing it over the past two years in a handful of markets, including India and Mexico. Payments are a key element of WhatsApp’s long-term plan to offer commerce within the app. More than 5 million merchants around the world use a business version of the messenger app, and in countries like India and Brazil, WhatsApp serves as the main or only online presence for many mom-and-pop retailers.
“Our goal is to provide digital payments to all WhatsApp users in Brazil using an open model and we will continue to work with local partners and the Central Bank to make this possible,” a WhatsApp spokesperson said. ”In addition, we support the Central Bank’s PIX project on digital payments and together with our partners are committed to work with the Central Bank to integrate our systems when PIX becomes available,” the spokesperson said, referring to Brazil’s proposed instant-payment system.
The company was surprised by the Central Bank’s decision, and the two sides were in regular contact in the run-up to the payments launch, said a person familiar with the talks who asked not to be named discussing private deliberations.
Brazil’s Central Bank said the suspension will let it evaluate any possible risk to the country’s system of payments and to determine whether the payments system meets the necessary rules. Starting the service without the regulator’s green light could generate “irreparable damage to the system, especially what concerns competition, efficiency and data privacy,” the banks said, adding that Mastercard and Visa could face fines if they don’t comply.
In a regulatory filing, Cielo said they suspended the services, and will keep the shareholders informed of developments.
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