How WhatsApp's Brazilian Payments Services Support Facebook's E-Commerce Efforts

The social media giant's payments efforts are joined at the hip with its rollout of new online shopping services for consumers and businesses.
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At a time when WhatsApp’s efforts to launch a payments service in its biggest market remain in limbo, the Facebook-owned  (FB) - Get Report messaging giant is looking to make a splash in its second-biggest market.

On Monday morning, WhatsApp announced that consumers and businesses in Brazil will be able to send and receive money by making a few clicks within its app’s message threads. Mastercard  (MA) - Get Report and Visa  (V) - Get Report payment cards issued by Brazilian banks will be supported, and transactions will be secured in part by requiring users to either enter a six-digit PIN or provide a fingerprint.

No fee will be charged for sending money. And WhatsApp says businesses receiving payments will only pay a processing fee that’s “similar to what they may already pay when accepting a credit card transaction.”

The service will lean on the Facebook Pay platform, which was unveiled in late 2019 and aims to let consumers use their saved payment account info -- either for credit/debit cards or a PayPal  (PYPL) - Get Report account -- to conduct transactions across Facebook’s various apps. It enters a well-developed Brazilian online payments market whose major players include MercadoLibre  (MELI) - Get Report (via its Mercado Pago service), PagSeguro Digital  (PAGS) - Get Report and the widely-supported Boleto Bancario service, which lets users make payments via linked bank accounts.

The move comes two years after WhatsApp first unveiled a payments service for India, where it had more than 400 million active users as of 2019. However, thanks to pushback from local regulators, the Indian payments service is for the moment still in beta mode and available to only a fraction of the country’s WhatsApp users.

By contrast, WhatsApp says its payments service will begin rolling out immediately in Brazil, where it has more than 120 million users, and has given no indication that the service faces regulatory hurdles.

As is the case with other payments efforts involving Facebook-owned properties, WhatsApp’s payments services are to a large extent a means to an end for Facebook. Or rather, a means to two ends: Driving more commerce activity on Facebook platforms, and strengthening Facebook’s massive ad business.

WhatsApp has already rolled out a service that lets small businesses showcase their products on their profile pages, as well as a service that charges larger businesses to message users in certain situations. And Facebook has been selling ads for its core news feed that let users send messages to an advertising business via WhatsApp or Messenger with the click of a button (they’re officially referred to as click-to-WhatsApp and click-to-Messenger ads).

And just last month, Facebook launched Shops, a platform for setting up digital storefronts that are accessible through both the core Facebook app and Instagram, and which can be promoted via ads. Notably, Shops storefronts let users message a business (via WhatsApp, Messenger or Instagram Direct) to do things such as ask product questions or receive customer support.

From Facebook’s perspective, if a WhatsApp payments service drives a higher conversion rate for click-to-WhatsApp ads and Shops browsing activity, and more generally provides the company with additional e-commerce transaction data that it can use to improve ad targeting, the service could have a lot of financial value even if Facebook doesn’t directly profit much from actual payments transactions.

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