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Facebook (FB) Launches WhatsApp Digital Payment in Brazil

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Facebook (FB - Free Report) launched a WhatsApp-based digital payments service for the messaging app’s 120 million users in Brazil, moving ahead with its plans to capitalize on emerging markets and bring e-commerce to its platforms.

Users can send and receive money by linking their WhatsApp accounts to their Visa or Mastercard debit and credit cards, and with local banks including Banco do Brasil, Nubank and Sicredi. Brazil’s largest payments processing company, Cielo will help in handling the transactions.

There will be no fees for consumers to use the payments service but merchants will pay a 3.99% processing fee to receive payments. Users will have to enter a six-digit PIN or fingerprint to authenticate transactions.

Facebook, Inc. Price and Consensus

Facebook, Inc. Price and Consensus

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Facebook’s Aggressive E-commerce Strategy for WhatsApp Pay

As of the end of February, WhatsApp messaging service had more than 2 billion users. The Brazil launch is the first nationwide rollout of payments on WhatsApp, and follows Mark Zuckerberg’s comments earlier this year that the company will prioritize introduction of the feature in four markets: Brazil, Mexico, Indonesia and India.

WhatsApp is already the dominant messaging app in each of these nations. 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 move comes after WhatsApp’s efforts to launch UPI payments service for 400 million monthly active users in India were held up by regulators, including the country’s central bank, for two years, despite a testing initiative. Nonetheless, in February, WhatsApp secured a license to operate from the National Payments Corporation of India (NPCI), after receiving the RBI’s approval.

In April, Facebook announced that it will pay $5.7 billion for a 10% stake in India-based telecom group Reliance Jio and that the two companies will focus on a partnership with JioMart, Jio’s newly launched e-commerce platform.

Last month, 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 $55 million in 2020. Total transaction value is projected at $108.3 million by 2024 with a compounded annual growth rate of 18.4% between 2020 and 2024.

The market's largest segment is e-commerce with a projected total transaction value of $32.8 million in 2020.

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.

According to research by Kantar on behalf of Mastercard in May 2020 with over 500 Brazilians on changes relating to payment habits, 75% of respondents would like to be able to pay in real-time regardless of their financial service providers, while 53% would like to pay via messaging apps or social media platforms.

The coronavirus outbreak has introduced changes in behavior when it comes to paying for goods and services, with 75% of Brazilians polled reported an increase in the use of digital payments 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 #2 (Buy) 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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