WhatsApp launches payments as Facebook struggles with trust

By Sunniva Kolostyak

WhatsApp is bringing digital payments to WhatsApp users in Brazil via WhatApp Pay, enabling users to send money or make purchases from local businesses through the chat function.

The popular Facebook-owned messaging app noted in an announcement that over 10 million micro and small businesses in Brazil will be able to benefit from the solution. Enabled by Facebook Pay, the company noted that it aims to enable people and businesses to use the same card information across all of Facebook’s apps.

Commenting on the announcement, Ivo Gueorguiev, Co-Founder and Executive Chairman of FinTech Paynetics told IBS Intelligence that it will be interesting to see how Facebook will approach growing the payment platform while struggling with a general lack of trust.

“There are certain complications around payments that are specific to the Latin America region and which will have informed this move, but which might hold WhatsApp and Facebook back from rolling it out to the rest of the world in the same way,” Gueorguiev said.

He noted that figures from McKinsey show that up to 65 per cent of adults in the region do not use formal financial services, but WhatsApp claims to have 120 million Brazilian users. Of these, 46 per cent have said that they have previously bought products through the app.

Moreover, WhatsApp has seen significant advantages across the country’s tax systems, high remittance levels and nuances associated with the Brazilian currency.

“But on a global level, and so in countries without these associated advantages, there may not be as much of a requirement or, indeed, demand for a payment service like this,” the Paynetics Co-Founder said.

“On top of this, there is the often-cited general lack of trust in Facebook and ongoing security and privacy concerns associated with the company that will make it interesting to see how the company approaches growing its payment platform going forward.”

Also commenting, Ian Bradbury, CTO of Financial Service at Fujitsu said the launch has come at a convenient time as billions worldwide are limiting physical contact and the handling of cash.

“As this shift toward digital payments continues, people will become more digitally savvy and expect tech to deliver a more streamlined payments and shopping experience,” Bradbury said.

“Consumers are digitally adventurous and are keen to use services that offer the greatest convenience, whoever might provide them. Financial services firms must continually offer the latest digital services for their consumers and seek to fit into their lives – or they may very well find themselves losing market share to new digital disruptors like WhatsApp.”

Gueorguiev added: “I see a more viable option for ROW as one where payments are embedded into the Facebook marketplace or other channels, such as Instagram, and where they can drive frictionless payment experiences for WhatsApp users as a result.”

To complete a purchase, users need to provide a six-digit PIN or fingerprint. So far, customers with Banco do Brasil, Nubank, and Sicredi on the Visa and Mastercard networks are able to connect their debit and credit cards. The payments processing is provided by Cielo.