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Interview: The rapid rise of Pix real-time payments in Brazil

Two years ago, the Brazilian Central Bank decided to launch Pix, a real-time payment scheme that the bank developed, manages, operates, and owns.

Since its launch, Pix has seen remarkable growth. We wanted to know more and interviewed Carlos Eduardo Brandt and Breno Lobo from the Brazilian Central Bank.

How would you briefly describe the Pix solution to those unfamiliar with it?

Pix is the Brazilian account-to-account payment method launched in 2020. It is instant, available 24/7, and ubiquitous. Pix can be initiated through the app of virtually every payment service provider (PSP) in Brazil (nearly 800 PSPs including financial and payment institutions), by using an alias or scanning a Quick-Response (QR) Code.

What were the main reasons behind the decision to develop Pix in Brazil? What were the key challenges encountered in its deployment?

Cash is the most widely used means of payment in Brazil. A payments’ diary survey in 2019 revealed that 77% of retail transactions in Brazil were cash based.

This naturally makes the retail payments market inefficient due to the high social costs associated with cash. In addition, the electronic payment instruments available before Pix had several flaws, so the digitisation of payments did not reach its full potential.

Brazil does not have an interbank direct-debit scheme. Credit transfer instruments are expensive, available only during business hours, and are not so easy to use.

In addition, debit and credit cards have several problems that prevent their wide acceptance by merchants: the fees charged are very high and the time for funds to become available is almost 30 days on average for credit cards.

Given this scenario, there was a great opportunity to build a new means of payment from scratch with the appropriate features to promote further digitisation of the market and to prepare our retail payment system for the future.

Due to the complexity of our financial system, with many and multiple types of institutions, the central bank decided to play a very active role in the design and implementation of the new ecosystem to ensure we would achieve the pursued public objectives.

The main challenge was to engage different institutions – traditional banks, digital banks, FinTechs, credit unions, etc. – with diverse interests, and to build a detailed rulebook that covered all the essential points for the smooth functioning of a new means of payment.

That encompassed rules of participation, forms of initiation, use of the brand, settlement process, service level agreements, criteria for authorisation and rejection of transactions, rules for returns, liquidity provision services, minimum requirements for user experience, fees for participants and for users, dispute resolution, penalties, etc.

Pix in Brazil

What new opportunities does Pix open up – What are the main use cases?

Pix has created a universe of possibilities for Brazilians. Virtually any payment or transfer made in Brazil today can be made electronically through Pix, regardless of the amount, the time, what is being transacted, and who is involved in the transaction.

All people need is to have an account, including a payment account, with one of the nearly 800 Pix participants.

Pix allows the transfer of funds between people and between companies, the payment of purchases in physical stores, e-commerce and m-commerce, the payment of invoices and bills (request-to-pay) – even with the possibility of scheduling – payments from companies to persons and even transactions involving the government both in the collection of taxes and fees and for the payment of citizens and service providers.

Pix has already various use cases. It has been widely used by people who previously did not have access to electronic credit transfer instruments or cards and had to make transactions using cash, with all the security risks involved and the opportunity cost of keeping funds outside the financial system.

In addition, small retailers, especially in the informal market, have used Pix as an alternative to the high fees charged by cards. Pix is being heavily used in e-commerce and m-commerce.

What have been the most significant developments since its launch?

Since Pix launched in 2020, it has been possible to initiate payments by using aliases or scanning a QR Code.

Throughout 2021, new functionalities were developed, such as the payment of invoices with the possibility of scheduling and automatic calculation of fines, interest, and discounts; the permission for payment initiation service providers (PISPs) to initiate a Pix; and the possibility of making withdrawals at merchants and automated teller machine (ATMs) using Pix.

What other major factors are likely to drive the evolution of the Brazilian payments landscape over the coming five years?

The evolution of the Brazilian payments landscape is very much centred on the new functionalities that will be created in Pix.

We understand that Pix is a very powerful tool that allows improvements in all the inefficiencies identified in the Brazilian market through the development of overlay services.

In the next few years, new functionalities will allow Pix to be a feasible alternative for interbank direct-debit schemes; enable buy-now pay-later solutions; offer a central solution for the presentment and payment of bills, both for individuals and companies.

Allow the use of new technologies, such as near-field communication (NFC), to enable new forms of initiation; enable offline transactions; and enable integration with instant payment systems from other jurisdictions.

This interview was first published in the European Payments Council newsletter


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