Allowing millions of Brazilian users of Facebook's WhatsApp to send money as easily as texts seemed a golden opportunity for the world's largest social media company.
The ubiquitous messaging service was finally entering the financial services arena with a payment service in Latin America's largest economy, after years of questions over how Facebook would make money from it.
The June launch, years in the planning, was meant to be the pilot for a potential global rollout - but eight days after going live, the central bank pulled the plug on it.
The shock decision underscores the challenge for Facebook in trying to win over financial regulators and the complexities facing watchdogs in assessing the risks of letting tech giants, with their vast network of users, loose in their world.
In Brazil, it also raises questions about the communications around the launch. WhatsApp executives and central bank officials had held at least three meetings in the previous 21 months, including two in the week running up to the launch.
In the first time he has spoken in detail about the decision, Central Bank President Roberto Campos Neto told Reuters the regulator had not determined how to deal with the proposed payment model - a new phenomenon in Brazil, which has no card money transfer service operated via an app.
"Prior to the launch, there was a meeting in which WhatsApp kind of explained its plan, but the central bank was taken by surprise with the launch on June 15," he said in an interview.
The regulator - which said it never received a formal launch request - suspended the service, Facebook Pay, on June 23.
Campos Neto and other officials said concerns centered on competition, data privacy - they have not provided details - and ongoing deliberations over whether WhatsApp required a license as a company offering or arranging payment services.
WhatsApp told Reuters it had answered central bank questions and provided the launch schedule during the final meetings.
"We spoke openly about our plans to bring WhatsApp payments to Brazil," it said. The company added it was deeply concerned about users' privacy, financial details were stored on a secured network and it had data security contracts with all partners.
WhatsApp said it did not want to become a financial services company. Financial institutions in Brazil are subject to capital reserve requirements and strict regulations.
As a way around this, and within existing rules, WhatsApp sought to use Visa Inc and Mastercard Inc, which already had central bank licenses, to carry out the money transfers.
"WhatsApp contacted us roughly two years ago to build a payments solution to bring convenience for their users and also because it did not want to become a financial institution," Visa's Brazil chief Fernando Teles said.
'IN A PHASE OF ADJUSTING'
WhatsApp said the service used payments networks from Visa and Mastercard, which are regulated companies in Brazil.
However Campos Neto said a money-transfer service provided by a tech platform had never existed in Brazil, the central bank had not yet decided whether WhatsApp itself needed a license.
"It's worth remembering that big tech isn't in the payments space in a big part of the world," he told Reuters on July 8. "So we're still in a phase of adjusting our regulations."
It is not the first time Facebook appears to have misread the regulatory runes as it seeks to enter the data-rich world of finance. A year ago, it unveiled plans for the Libra cryptocurrency, only to be met with a backlash from central banks.
In Brazilian payments, the prize is large, with a burgeoning market that saw 1.8 trillion reais ($336.86 billion) in card transactions last year.
In the initial stages of its service, WhatsApp was also looking to make use of a provision in payments regulation allowing companies to start services without a license until they reached 500 million reais or 25 million transactions over a 12-month period, according to a source close to the company.
This, again, is within the rules. However the provision, Campos Neto said, was aimed at encouraging small businesses to enter the market as opposed to a big tech network like WhatsApp with 120 million Brazilian users.
"WhatsApp tried to take advantage of this rule, saying, 'We're going to start with very low volumes because once we're in the system, it will be tough to take us out'," he said, describing the company as using "this volume gimmick".
The central bank changed this provision on June 23 to allow it to suspend companies covered by it.
Three meetings were held between WhatsApp and the central bank about the payment service, according to public central bank records: in October 2018, plus this year on June 9 and 12 - with one of those final talks attended by Campos Neto and WhatsApp Chief Operating Officer Matthew Idema.
WhatsApp said it also presented the central bank with its partnership model in 2019, although Reuters could not independently verify that meeting and the central bank declined to comment on meetings or dates.
Visa and Mastercard told Reuters they did not notify the central bank they planned to perform transfers for WhatsApp because they thought they already had the required licenses.
"There was no specific rule about messaging services in payments in Brazil, so we did it (the partnership) complying with existing rules," said Joao Pedro Paro, president of Mastercard for Latin America Southern Cone.
FACEBOOK'S GLOBAL AMBITIONS
The setback is the latest blow to Facebook's global payments ambitions, key to boosting revenue in the developing markets that account for most of its user growth and realizing CEO Mark Zuckerberg's vision to stitch together the infrastructure underlying Facebook's apps, which also include Instagram.
WhatsApp has been trying to launch payments since 2018 in India, its biggest market, but remains stuck in beta testing.
The Brazilian service would not charge individual users, but merchants would pay a fee per transaction.
One competition concern, according to a source close to the central bank, centers on WhatsApp's planned use of Cielo SA as its payments processor - or acquirer - for cards like Visa and Mastercard. Cielo already has a dominant market share of 40 percent in Brazil.
"I also must see the platform is open, which means that if more acquirers want to be in the platform, they are free to participate," said Campos Neto, though he did not mention Cielo.
WhatsApp, which has signed a deal with Cielo, said it did not have an exclusivity arrangement. Cielo declined to comment, but earlier told an antitrust watchdog there was no exclusivity.
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, a different terrain from Facebook Pay. WhatsApp has said it is open to integrating its service with Pix, which could offer one way to help break the deadlock.
The future remains uncertain, however.
Since Facebook Pay was suspended, central bank officials have met executives from WhatsApp, Mastercard and Visa in an attempt to find a way through.
Visa and Mastercard both delivered new business plans to the regulator last week in which WhatsApp formally appears as the originator of payments to be processed by the two other firms.
"WhatsApp did not, and still does not, need to request a license to work with our partners," WhatsApp said. "If a change were to require WhatsApp to obtain a license, we would do so."