The WhatsApp Outage and Its Global Economic Implications

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When Facebook went down for several hours this week we got a feel for how much people rely on the company and its applications. And not just because they’re addicted to scrolling and love it.

These platforms are also used for commerce and banking, including WhatsApp, the messaging service. In many parts of the world, you can also use it to send money, just like you would with Venmo, or to pay for a purchase.

In some countries this is a big problem because the banking and financial infrastructure is less developed. And maybe you have a bank account, but there is no branch nearby to get the money. Or there isn’t a mobile app you can use.

There are versions of What’s App banking in Brazil, India and Argentina.

Lisa Ellis, partner at research firm MoffettNathanson, said when the outage occurred:

Lisa Ellis: On the commerce side, businesses that rely on WhatsApp for payment literally wouldn’t be able to transact, so parts of the economy would shut down. If you can imagine a food truck or small vendor who uses WhatsApp as their primary means of receiving payments, they would be forced to ask people to give them money or they would literally have to shut down, exposing their business to the vulnerability of their business. to a single form of payment.

Lisa Ellis (courtesy Ellis)

Marielle Segarra: So what do you think will be the long-term impacts of the blackout?

Ellis: So, the longer term implication is likely that businesses and consumers are diversifying a bit away from their reliance on WhatsApp or a single platform, a single point of access to do these banking transactions and commercial. I’ll be interested to see if Facebook, if they’re serious about this investment, go their separate ways and invest more in network quality for actual payments and banking, like supporting WhatsApp. Because it’s a very different level of investment and sophistication that you need for making payments and moving money versus moving information.

Segarra: So it all seems pretty precarious. Like, I wonder, is it a good idea to have an economy that relies on WhatsApp?

Ellis: It is never good for an economy to rely on one platform for much of banking and commerce, period. There are several ways to reduce this vulnerability. Yes, one is just to have multiple options. Of course, another option is to [use] a Visa or Mastercard infrastructure, where they could choose to use a potentially safer and more resilient option for the movement of real money behind the scenes. So they chose to try and build this thing in-house. It’s another choice.

Related links: More information from Marielle Segarra

WhatsApp is not the only Facebook platform used for commerce. There is also Facebook Marketplace, which a lot of people use to sell stuff. And Instagram, where small business owners advertise and sell their products. All of them turned dark on Monday.

If you are wondering what really happened there, like what caused the outage, our own Molly Wood had a very helpful explanation on our ‘Marketplace‘.

Basically the problem was an internal Facebook error. But the timing raised eyebrows. Because Facebook was already at the top of the list this week.

Tuesday, whistleblower Frances Haugen, former product designer at Facebook, testified before the Senate. And she called on lawmakers to regulate the business.

Frances Haugen, a former product designer at Facebook, tweeted a link to her testimonial on Tuesday.

Senator Jerry Moran, a Republican from Kansas, asked him to be precise.

“Which regulations or congressional lawsuits or administrative actions do you think would have the most impact or be feared the most by Facebook, Instagram or allied companies? Moran asked.

“I strongly encourage reform of section 230 to exempt decisions about algorithms, right?” So edit 230 around the content, I think it’s very complicated. Because user-generated content is something businesses have less control over, they have 100% control over their algorithms, ”Haugen said. “And Facebook shouldn’t give free rein to the choices it makes to prioritize growth, virality and responsiveness over public safety. They shouldn’t get a free pass because they are paying their profits right now with our security. “

Section 230 of the Communications Decency Act is internet law that has been interpreted to mean that technology companies are not responsible for content posted by users on their platforms.

And Haugen says, yes, okay. But let’s hold them accountable for their algorithms that spread misinformation and create damage.

Haugen also suggested that Congress create a dedicated watchdog headed by former employees of tech companies who can suggest reforms to social media platforms like Facebook.

“There has to be a regulatory focus where someone like me could take a tour of duty after working in a place like this and have a place to work on things like regulations to pass that information to the boards of. surveillance, ”she said.

And Haugen said, yes, those things could affect Facebook’s bottom line. But it will always pay off.

Facebook is currently valued at just under $ 1,000 billion.


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