Brazil suspends WhatsApp payments amid fears over market competition

The country's authorities warn of potential "irreparable damage" that could be caused by the new feature of the messaging app.

Brazil's central bank and the country's antitrust watchdog Cade have ordered the suspension of financial transactions via WhatsApp as part of an investigation into the threats the app presents to the national payments system.

As part of the decision, Visa and Mastercard, which intermediated the transactions, have been told to halt the operation or be subjected to fines and administrative sanctions. The decision follows the launch of payments via the Facebook-owned messaging app on June 15, which would happen gradually over the coming weeks.

According to a statement issued by the central bank, the operation of the service now depends on the outcome of further analysis: "The central bank's motivation for the decision is to preserve an adequate competitive environment, which ensures the functioning of an interoperable, fast, secure, transparent, open and cheap payments system", it said.

The institution noted the start or continuity of the service without prior regulatory analysis "could generate irreparable damage" to the Brazilian payments system, especially when it comes to competition, efficiency and data privacy.

Starting with its second-largest market after India, where WhatsApp has over 120 million monthly users, the messaging app's owner Facebook planned to roll out the payments feature across its family of apps. The service was launched in Brazil in partnership with Visa and Mastercard, local lender Sicredi, Brazilian banking giant Banco do Brasil and challenger Nubank, as well as payments processor Cielo.

Following the announcement of WhatsApp's payments functionality in Brazil, the central bank and Cade immediately raised concerns over potential market fragmentation and concentration.

In parallel with the suspension of the paymentsservice, Cade also blocked WhatsApp's partnership with Cielo, the country's largest payment processor. The company declined to comment on the decision.

On the latest developments, WhatsApp noted "the goal is to provide digital payments to all WhatsApp users in Brazil, with an open model and working with local partners and the Central Bank".

The company also said it supports the central bank's instant payments initiative Pix, which is set to launch later this year. The social media firm added that it is committed to integrating its service with Pix as soon as it becomes available.