Facebook blocking financial paths? Brazilian authorities halt WhatsApp payment plan due to risk factors

On June 15, following news about Facebook's payment system, Facebook founder Mark Zuckerberg announced that WhatsApp would enable peer-to-peer payments in Brazil. Facebook described the feature as similar to the vision of the Libra wallet Novi: "Making payments as simple as sending messages." However, according to a report by Bloomberg on the 24th, Brazilian financial authorities have halted the project due to concerns over risks. Financial experts have described this move as highly unusual.

Libra Precursor: Facebook Pay

For China, in-app payments via messaging apps are already commonplace with WeChat and Alipay being the frontrunners. However, for other countries, this is not as straightforward. Zuckerberg stated that Facebook was able to offer this service only after partnering with three local banks and a leading financial payment provider in the area.

Described by him, Brazil is the first country where WhatsApp is integrating Facebook Pay. It allows users to send and receive money and enables small businesses to operate directly on WhatsApp. (Facebook's electronic payment system, Facebook Pay, was launched in November 2019)

This aligns with the vision of the Libra wallet Novi, but the Libra dream is bigger, aiming to become a global cross-border payment medium and promote financial inclusion. The groundwork laid by WhatsApp in Brazil is just the beginning.

However, the outcome of being halted may be due to concerns from countries regarding the dominance of powerful corporate payment networks.

What Is the Brazilian Government Concerned About? Pix Project?

In fact, Brazil's economy has been severely impacted by the pandemic, being the country with the second-highest death toll and experiencing the highest currency devaluation among emerging market currencies this year, facing an inflation crisis.

Why was the WhatsApp payment project halted? The statement from the Central Bank of Brazil only mentioned: "To protect a suitable competitive environment in the mobile payment field and ensure the normal operation of a fast, secure, transparent, open, and low-cost payment system with interoperability." The bank has ordered VISA and Mastercard to stop providing payment services for WhatsApp or face penalties. Furthermore, the bank stated it did not have the chance to analyze the potential impact of this service beforehand.

A spokesperson from WhatsApp responded promptly, stating they would cooperate with the Central Bank and maintain an open attitude. More importantly, they will support the Central Bank of Brazil's Pix Project announced in February and are committed to integrating it with WhatsApp.

It seems that the Pix Project might be the root of the issue. This official electronic payment system requires financial institutions with over 500,000 accounts to implement this system by mid-November this year. It will be a peer-to-peer, instant payment system with functions for payments, tax payments, bill payments, etc., can be done using QR codes or phone numbers for transfers.

According to the President of the Central Bank of Brazil, "This new payment method that combines financial technology and open banking concepts will promote the future financial transformation of our country."

Perhaps due to the importance of this project, the Central Bank had to step in at this point to reassess the potential threat posed by WhatsApp. If the more influential Libra were to officially launch in the future, it would undoubtedly face significant national-level resistance once again.