Outside of Asia, WhatsApp’s biggest market is Brazil, with 147.37 million users. Brazil accounts for 54 per cent of the entire LatAm user base. In 2021, WhatsApp introduced WhatsApp Pay for users to make peer-to-peer (P2P) transactions. Following this success, and the demand for more payment options, WhatsApp has now launched a B2C service. Looking to uncover if social media communication platforms are the future of payments, we reached out for feedback.
On 6 March 2023, WhatsApp received the green light from the Central Bank of Brazil to launch its business payments service. This will enable small businesses to talk to their customers through the app, and sell their goods directly to them.
In 2018, the app’s business model was launched in Africa and India. Due to the number of users, many small businesses found it easier to promote their products through WhatsApp. It provided a lifeline for many of them during the pandemic. However, the Central Bank of Brazil did not authorise business payments when this was launched. In fact, it wasn’t till 2021 that P2P transactions were authorised by the regulators.
During a 2021 survey fielded in Brazil, around 38 per cent of responding WhatsApp users said they were clients of Banco do Brasil, Nubank, and/or Sicredi and would like to use WhatsApp Pay. This was compared to the 28 per cent of clients that did not want to use WhatsApp Pay.
Entering the business payments world
In November 2022, the first WhatsApp Business Summit in Brazil took place. There, Guilherme Horn, PhD, head of WhatsApp LatAm, Meta, completed the first Brazilian business payment transaction. On stage, he showed step-by-step how the service would work using the Brazilian Real.
During the event, Mark Zuckerberg, chief of Meta said: “We want to make it easier for people to get more done on WhatsApp. Part of that is building better ways to engage with businesses. And while millions of businesses in Brazil use it for chat, we haven’t made it easy to discover businesses or buy from them. As a result, people end up having to use work-arounds. The ultimate goal here is to make it so you can find, message and buy from a business all in the same WhatsApp chat.”
Five months later, in partnership with Mastercard, Visa, Cielo, Fiserv, Getnet Brasil, Mercado Pago and Rede, Horn announced the project’s green light on LinkedIn.
A sign of the times or a one-off exception?
Wanting to understand why this has been so highly anticipated, we asked our community for comment.
No immediate direct competitors
According to Richard Gardner, CEO and founder of Anthropic AI, the sales AI fintech: “At first, WhatsApp was only allowed to move forward for P2P payments, but that was not the end goal for WhatsApp.
“The goal was always to make this a B2C program which allowed local merchants to begin accepting digital payments. It was geared towards those businesses without significant exposure to the digital payments market in an effort to make those businesses more competitive. It would also gain their long-term loyalty in a way that cemented WhatsApp’s place in Brazilian society.
“This is a long-term process that will take some time to come to full-term, but there’s an enormous payoff. Both to the Brazilian economy and to WhatsApp, should the gambit pay off. Expect other apps to look into this kind of expansion, but I doubt they will kick off as direct competition in Brazil. There are other countries with similar opportunities, including India, Nigeria, and South Africa. This is in addition to others in Southeast Asia and South America.”
Creating the ultimate personalised payments experience
The importance of personalisation cannot be understated according to Steven Madow, vice president of product at paytech, Stax Payments: “Social media payments such as WhatsApp’s new business payments service are a great example of natively baking payments into a conversation that is already going on between businesses and consumers.
“This feature could be especially impactful for small businesses. It allows them to directly engage with customers and foster lasting relationships through experiences. Such as: providing custom product recommendations based on conversations within the platform. Offering tailored product recommendations can also help consumers feel valued, increasing customer retention.
“One key aspect of these types of payments is that they personalise the payments experience within networks that consumers are already familiar with. However, social media companies have to create a space that consumers trust enough to make a payment with that platform. The trust aspect will be a big driver of adoption. That falls on the merchant as well to have an engaging dialogue with consumers to make them feel confident enough to pay for something this way.
“On the social media platforms’ end, one big element of trust is security. These companies need to double down on steps like verification if they’re going to start offering payments on their platform.
“Additionally, these payments capabilities have to be well built out and smooth running the minute they are rolled out. If a consumer’s first experience paying for something through a platform like WhatsApp is negative, they are unlikely to want to pay that way again. So, platforms that are offering payments need to get it right from the start.”
Only the beginning
Lucio Vargas, head of Brazil at paytech, Unlimint, says this is only the start for communications platforms: “Although we have a significant percent of the population unbanked in Latin America, we see more and more people going digital thanks to the arrival of fintechs that are offering more affordable financial services.
“In addition, Central Banks in LatAm countries are promoting open banking initiatives in different ways. This is as a way to better support customers and companies needs and also offering more inclusion.
“For this reason, more people are making payments online using the newly integrated financial system. According to a Global Findex report by Global Bank, 73 per cent of adults in Latin America already have a bank account. This is a global trend and WhatsApp Pay is a service that comes to complement along with other payment methods this demand for fast and convenient payments.
“Just as there is room for WhatsApp Pay in Brazil, there are opportunities for other popular messaging apps or apps from other segments to offer payment services in more countries.