The Brazil Central Bank and antitrust regulators are known as Cade, suspended Facebook Inc.’s WhatsApp messenger payment features in their country on Wednesday 24 June 2020.
Brazil’s central bank took the decision aiming to preserve an adequate competitive environment, that ensures the functioning of a payment system which is interchangeable, fast, secure, transparent, open and cheap.
Bank authorities requested that Mastercard Inc. and Visa Inc. should stop payments and money transfer activities through the app.
Cade suspended WhatsApp’s partnership with electronic payment company Cielo preemptively. According to a statement on the regulator’s website, the vast WhatsApp user database coupled with Cielo’s high market share in payments proved to be high, causing a barrier for any new competitors.
WhatsApp has more than 120 Million users in Brazil
The regulators needed to act fast to avoid competitors apprehensions since the deal was not presented for evaluation.
In countries like India and Brazil, WhatsApp serves as the main online application for many retailers. 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.
In response to Brazil’s proposed instant- payment system, WhatsApp spokesperson said that their goal is to provide digital payments to all WhatsApp users in Brazil using an open model and they will continue to work with local partners and the Central Bank to make this possible.
Besides, they support the Central Bank’s PIX project on digital payments and together with their partners, they are committed to working with the Central Bank to integrate their systems when PIX become available.
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. Mastercard and Visa could face fines if they don’t comply.
The Brazil Central Bank took an exceptional decision so as to protect and maintain its monetary policies. On the other hand, the bank disappointed Facebook by the suspension before it officially launched the new payment feature for the users.