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Facebook (FB) Relaunches WhatsApp Digital Payment in Brazil

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Facebook’s (FB - Free Report) WhatsApp will now allow users to transfer funds in Brazil after receiving approval from the country’s central bank, per a Reuters report. Users can send and receive money by linking their WhatsApp accounts to their Visa or Mastercard debit and credit cards.

Markedly, in June 2020, the instant messaging app’s mobile payments service was suspended in the country a week after its rollout

The country’s central bank had ordered Visa and Mastercard to shut down the project with the Facebook-owned chat app, citing concerns over its anti-competitive nature. The central bank had also raised privacy concerns regarding the service.

WhatsApp has had to obtain formal approval as a payments initiator using Visa and Mastercard as processors despite attempts to avoid regulatory pressure of becoming a financial services company in Brazil.

Facebook’s Growing E-commerce Push for WhatsApp Pay

WhatsApp is already a dominant messaging app globally with over 2 billion users. If Facebook is able to encourage funds transfer, it can then expand WhatsApp’s shopping activity features. This will then, ideally, make WhatsApp the key app for a wide range of functions including paying for groceries, buying public transport tickets, banking, bill payments, expanding its dominance.

The Facebook-owned messaging platform has already launched WhatsApp Pay to enable small businesses and individuals in India to buy and sell things through the app with plans to expand in Brazil, Mexico and Indonesia.

In April 2020, Facebook picked up a 9.99% stake in Reliance Industries’ Jio Platforms for $5.7 billion. The deal, which valued Jio at $65.95 billion, makes Facebook the largest minority shareholder in the India-based telecom network. Jio Platforms is a wholly-owned subsidiary of Reliance Industries Limited.

Moreover, Facebook invested an undisclosed amount in ride-hailing company, Gojek, Indonesia’s biggest start-up with a valuation of over $1 billion — focused on its digital payments arm GoPay.

Notably, in Kenya, the implications of launching the service will be especially significant for Safaricom, which has maintained a firm grip on money transfer and digital payments through its flagship platform M-Pesa.

Appetite for Digital Payment Services in Brazil

WhatsApp payment in Brazil will depend on the Facebook Pay platform, which was unveiled in late 2019 and aims to let consumers use their saved payment account information -- either for credit/debit cards or a PayPal (PYPL - Free Report) account.

Per Statistia, Brazil’s total transaction value in the digital payments segment is projected to reach $90.5 million in 2021. Total transaction value is projected at $156 million by 2024 with a compound annual growth rate of 14.5% between 2021 and 2025.

The market's largest segment is e-commerce with a projected total transaction value of $56.6 million in 2021.

Facebook is entering a well-developed online payments market in Brazil whose major players include MercadoLibre (MELI - Free Report) through its Mercado Pago service, PagSeguro Digital (PAGS - Free Report) and the widely-supported Boleto Bancario service, which lets users make payments via linked bank accounts. In addition, Brazil is the only country in Latin America where Samsung Pay, Google Pay, and Apple Pay are all present.

Moreover, Pix instant payments system mandated by Brazil’s central bank was officially launched on Nov 16, with 734 institutions participating. In its first month of operation, 90 million Pix transactions worth BRL 83.4 billion were carried out, according to data from the Central Bank. Markedly, over 134 million user accounts have been registered since launch.

WhatsApp is only allowed to do peer-to-peer payments in Brazil, not involving merchants, unlike the free Pix service, which can be used to pay businesses and individuals. Facebook is still seeking approval to operate with merchants.

The coronavirus outbreak has introduced changes in behavior when it comes to paying for goods and services, with an increase in the use of digital payments in Brazil due to social distancing recommendations.

That’s included with Facebook’s WhatsApp Business, which lets small and medium businesses post catalogs and stock links within the app, and new Facebook Shops, launched last month, on Facebook and Instagram. We believe the integration of its payment processes could expand this Zacks Rank #3 (Hold) company’s sources of revenues beyond advertising in the region.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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