Talk about an about-face.
The news that Brazil has seen a sudden “freeze” of WhatsApp payments, introduced only last week by Facebook, raises questions about the nature of platforms, the nature of competition — and whether regulators may be treading with heavy feet on consumer choice.
As had been reported Tuesday (June 23), Brazil’s central bank suspended the WhatsApp payment feature from being used in that country. The central bank cited antitrust concerns as the reason behind the suspension. Among the firms that have been asked to stop payments done through the app: Mastercard and Visa.
At a high level, the bank said, it would look at risks that might be in place with WhatsApp — and the central bank has said it wants to “preserve an adequate competitive environment that ensures the functioning of a payment system that’s interchangeable, fast, secure, transparent, open and cheap,” Bloomberg reported.
In other words: Facebook’s grand push into payments — where WhatsApp users would use Facebook Pay (launched last year) — has encountered hurdles and setbacks before anything has happened. It’s a blow to Facebook, sure, because Brazil is the second largest market for WhatsApp. That means gaining critical mass for payments, with an installed base of users — 120 million and counting — faces some new headwinds.
Now, a suspension does not mean cancellation. And it is certainly possible that the central bank could conduct its review, and then give a green light. Facebook, for its part, has signaled willingness to work with the central bank on its instant payment system, PIX.
“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 company said through a spokesperson.
In the meantime, the ripple effects have been immediate. As reported Wednesday by Reuters, shares in Brazilian firm Cielo plunged roughly 10 percent. Cielo had been tapped to process payments for the WhatsApp payment service.
At the root of the conundrum is consumer choice — and whether central banks can, or should, put the brakes on a service that clearly has gotten a thumbs-up from individuals and businesses. The fact that WhatsApp has tens of millions of adherents in such a short timeframe means that consumers prize direct contact with one another — and the payments functionality, as Facebook has noted, can have far-reaching effects. As the firm noted in a blog post last week, “The over 10 million small and micro businesses are the heartbeat of Brazil’s communities. It’s become second nature to send a zapto a business to get questions answered. Now in addition to viewing a store’s catalog, customers will be able to send payments for products as well.”
That strategy speaks to financial inclusion, which we contend, ostensibly, should be a goal for any central bank’s policy. Suspending the payments service on the guise that an “adequate” competitive landscape needs to be in place seems to imply that the central bank is either scrambling to examine what might have been looked at in a timely fashion before. And promoting a competitive environment seems to hinge on acknowledging there’s room for PIX and other services as well. For now, perhaps in a best-case scenario for Facebook, and payments choice in Brazil, it’s a case of “hurry up and wait.”