How does WhatsApp’s digital payment service work?

In June 2020, WhatsApp launched its digital payments service in its first country, Brazil, with the goal to capitalize on its popularity in the market. This move is part of parent company Facebook’s drive to bring more e-commerce to its platforms. As such, the payments are enabled through Facebook Pay, which parent company Facebook said last year it would be rolling out to Instagram, Messenger, Facebook, and eventually WhatsApp.

Users will now be able to pay friends and local businesses within a chat, attaching payments as they would a photo or video. Initially, the system will accept payments from debit and credit cards from Banco do Brasil, Nubank and Sicredi, with more expected to be added. To begin with, users will be able to send or receive money up to 20 times a day, transactions can only occur in Brazil itself, and the spending will be capped at BRL 1000 (USD 194) a day and BRL 5000 (USD 973) a month.

With WhatsApp’s digital payments, users will be able to make a purchase without leaving their chat. The company says that sending money to loved ones will be as easy as sending a message, pointing out that at the moment that will be especially important while people are separated from each other.

For the payments system to work, users need to link a credit or debit card to their WhatsApp account, and transactions will be secured with either fingerprint or a six-digit PIN.

While, WhatsApp Pay allows users to send money to one another for free or make purchases from small businesses, small businesses will have to pay a processing fee to receive customer payments.

Brazil has been chosen due to the number of WhatsApp users in the country, which currently stands at 120 million, making the country its second-largest market after India. WhatsApp has also said it wants to support the digitisation of the 10 million small companies in the country and the financial recovery of these businesses following COVID-19.

While, the company already officially launched the payment service in 2018 in India, where it has 400 million users first, the firm’s efforts have been held up for two years by regulators, meaning a nationwide rollout has not yet been possible.

WhatsApp and Facebook will not be able to automatically use your payment account and transaction details to inform the ads that you see, but representatives from the company have already said that individual businesses could use certain user information “for advertising purposes”. It remains to be seen how this will work in conjunction with privacy laws.

In January 2020, chief executive Mark Zuckerberg outlined plans to offer the service in India, Indonesia and Mexico. However, there’s no news on when the system will roll out to other markets.

Got any questions? Leave a comment below and we will try and find the answer. If you want to know more about the payments industry, why not read our other posts below?

*Update* As of 24th June 2020 WhatsApp pay has been suspended in Brazil by the Central Bank while it evaluates any potential risks of the service.