The WhatsApp outage and its global economic implications

When Facebook went down for several hours this week, we got a sense of just how much people rely on the company and its apps. And not just because they’re addicted to scrolling and likes.

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

In some countries, that’s a big deal because the banking and finance infrastructure is less developed. And maybe you have a bank account, but there’s no branch nearby to get cash. Or there’s no mobile app you can use.

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

Lisa Ellis, a partner with research firm MoffettNathanson, said that when the outage happened:

Lisa Ellis: On the commerce side, businesses that are reliant on WhatsApp as a conduit for their payments literally couldn’t transact business, so pieces of the economy would shut down. If you can imagine a food truck or a small vendor that’s using WhatsApp as the primary way that they receive payments, they would be stuck either having to ask people to give them cash or they would just literally have to close, which exposes the vulnerability of their business to a single form of taking payment.

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

Ellis: So the longer-term implication is probably businesses and consumers diversifying a little bit away from their dependence on WhatsApp or a single platform, a single point of access for doing this banking and commerce. I’ll be interested to see whether or not Facebook, if they’re serious about this investment, separates out and pours more investment into the quality of the network for the actual payments and banking business like for supporting WhatsApp. Because it’s a very different level of investment and sophistication that you need to do payments and money movement compared to doing information movement.

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

Ellis: It’s never good for an economy to rely on any one platform for a large portion of banking and commerce, period. There’s a couple of ways to reduce this vulnerability. Yes, one is just to have multiple options. Certainly, another option is to [use] a Visa or Mastercard infrastructure, where they could opt to actually use a potentially more secure, more resilient option for the actual money movements sitting behind the scenes. Whereas they’ve opted to try to build this stuff in-house. That’s another choice.

Related links: More insight from Marielle Segarra

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

If you’re wondering what actually happened there, like what caused the outage, our very own Molly Wood had a really helpful explanation on our “Marketplace.”

Essentially, the problem was an internal error at Facebook. But the timing did raise some eyebrows. Because Facebook was already top of mind this week.

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

Sen. Jerry Moran, a Republican from Kansas, asked her to get specific.

“What regulations or legal actions by Congress or by administrative action do you think would have the most consequence or be feared most by Facebook, Instagram or allied companies?” Moran asked.

“I strongly encourage reforming Section 230 to exempt decisions about algorithms, right? So modifying 230 around content, I think it’s very complicated. Because user-generated content is something that companies have less control over, they have 100% control over their algorithms,” Haugen said. “And Facebook should not get a free pass on choices it makes to prioritize growth and virality and reactiveness over public safety. They shouldn’t get a free pass on that because they’re paying for their profits right now with our safety.”

Section 230 of the Communications Decency Act is the piece of internet law that’s been interpreted to mean tech companies are not liable for content posted by users on their platforms.

And Haugen is saying, yeah, OK. But let’s hold them responsible for their algorithms that spread misinformation and create harm.

Haugen also suggested that Congress create a dedicated oversight body led by former tech company employees who can suggest reforms of social media platforms like Facebook.

“There needs to be a regulatory home where someone like me could do a tour of duty after working at a place like this and have a place to work on things like regulation to bring that information out to the oversight boards,” she said.

And Haugen said, yeah, those things might affect Facebook’s bottom line. But it’ll still be profitable.

Facebook is currently valued at a little under $1 trillion.