Brazil cenbank approves WhatsApp Pay

Brazil's central bank has approved WhatsApp Pay, which uses Visa and Mastercard accounts. 

The approval is part of a plan to increase competition in the financial system through technology.

In Brazil’s banking sector, the five biggest players account for almost 80% of lending and own brokerages and insurance companies.

Central bank president Roberto Campos Neto has repeatedly said that data processing is becoming more important than financial services, and that big technology companies will probably foster enough competition to reduce concentration.

Even so, the approval of WhatsApp Pay hit some roadblocks. The company announced the service in August, but the central bank quickly suspended it, saying that any service with potentially 120mn clients from the start needed thorough evaluation.

At the same time, the institution was releasing its own instant payment service, PIX, and concerns emerged that the services could clash.

The approval enables instant direct or pre-paid transactions among WhatsApp users who register Visa or Mastercard accounts.

"I have no reason to believe this won't be very successful, as Brazilians love WhatsApp and technology, and PIX proves that there is a demand for these arrangements," Andre Perfeito, chief economist at brokerage Necton, told BNamericas.

PIX was an instant hit, handling transactions that totaled US$40bn during its first four months. It allows transfers without charging fees. 

The system is especially important for card companies, which are expected to see a reduction in transactions as PIX is substituting credit and debit payments. Banks also lost revenue due to a falling number of transactions they can charge for, according to Perfeito.

“This is the natural step that the regulators are taking after starting discussing the financial regulation technology agenda, which [has been] a project of at least the last two central bank presidents,” Perfeito said.

Campos Neto told local media last week that the bank is also in talks with Google and PayPal.

In a press release, the financial regulator also said other payments systems using Facebook are under consideration.