Kiffmeister’s FinTech Daily Digest (07/18/2020)

Communication collapse: Inside Facebook’s tussle with Brazil’s central bank
This is a nice chronicle of how Facebook tried to exploit a loophole in Brazilian payments regulations to launch a WhatsApp-based payment service. First, in order to not be classified as a financial services company and be subject to capital reserve requirements and strict regulations, WhatsApp used Visa and Mastercard, which already had central bank licenses, to carry out the money transfers. (Visa and Mastercard did not notify the central bank they planned to perform transfers for WhatsApp because they thought they already had the required licenses.) WhatsApp was also looking to make use of a provision in payments regulation allowing companies to start services without a license until they reached certain transaction volume thresholds. However, the provision was aimed at encouraging small businesses to enter the market as opposed to a BigTech like WhatsApp with 120 million Brazilian users, so the central bank changed this provision on June 23 to allow it to suspend companies covered by it. In a further twist, the central bank is itself planning to roll out a fast-payment system in November, Pix, which uses consumers’ checking accounts, and WhatsApp has said it is open to integrating its service with Pix.

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