Report offers FI’s insight into Instant Payment monetisation

Matera has released a special report detailing adoption of Brazil’s highly successful Pix system of instant payments.

Pix by the Numbers provides key insights for US and other markets financial institutions (FIs) as they prepare for the impending FedNow launch in July and impending launches of instant payments around the world.

Many US-based FIs wonder how they can make money from instant payments, and Pix by the Numbers offers a glimpse into future opportunities, as Brazil’s payments landscape is significantly more mature.

For example, Pix credit is an innovation FIs created on top of the Pix instant payments rail that enables banks in Brazil to make up for lost interchange revenue.

Pix transformed the Brazilian payments economy, and there’s much more to come. The Central Bank outlined the roadmap of product enhancements recently and includes things such as recurring payments, efficiency improvements and better fraud protection.

But, it’s the innovations on top of Pix (that are NOT mandated by the Central Bank) that may drive the biggest growth in transactions and revenue opportunities for banks.

Take Pix Credit, for example.

Nubank, Digio, Banco BV and others are enabling customers to use their credit card limit to make payments with Pix. Payments can be made all at once, or in up to 12 instalments.

When customers use Pix Credit, the amount paid via Pix shows up on their credit card bill, and they actually have more time to pay. There are several reasons why consumers might use Pix Credit.

• When they need to make a payment, but don’t have a balance in their account (e.g. emergency medical bills or paying an electrical bill).
• When a store offers a discount on purchases for payment with Pix. With Pix on Credit, consumers can take advantage of the discount, but continue to pay the bill with their card, up to 12 times.
• Those who want to concentrate all their expenses on their card bill to keep their finances organized. There is a cost to consumers for Pix Credit. The interest rate charged by banks typically varies from 3.9% – 9.9%.

“When executed well, instant payments can transform financial systems and meet the needs of merchants and consumers much more effectively than other forms of payment, as we’ve seen firsthand,” said Carlos Netto, CEO of Matera.

“That said, Brazilian banks that didn’t embrace instant payments early on were left behind, losing both customers and opportunities.

As US financial institutions prepare for FedNow, it’s important to know that instant payments processed through technologies like QR codes don’t have to be hard. Our software shows that true payments innovation is very much within reach.”

When Pix launched, it was primarily used for person-to-person payments. Over time, business-related use cases grew. While 14 billion of the total 24 billion Pix transactions in 2022 were between two people, the number of person to business transactions nearly quadrupled in 2022 to over 4 billion.

As Brazilian consumers have become more comfortable using Pix, the average value of a Pix transaction has come down across all use cases. In the merchant space, the average value of a P2B Pix transaction was approximately $38 (USD) in December 2022 which is down more than 35% compared to December 2021.

Pix by the Numbers:

• Within its first 12 months, Pix served over 100 million users.
• Last year, there were more than 24 billion Pix transactions worth approximately $2 trillion USD. That’s more than double 2021 volumes.
• The number of Pix transactions is higher than credit and debit transactions.
• While 14 billion of the total 24 billion Pix transactions in 2022 were between two people, the number of person-to-business transactions nearly quadrupled in 2022 to over 4 billion.
• As merchants continue to adopt Pix, the use of QR Codes continues to grow. Nearly 20% of instant payment transactions are initiated by QR Codes.
• As of December 2022, 63% of Pix transactions were from consumers ages 20 – 39. But consumers 40 – 59 now make up nearly 30% of Pix transactions and are growing.

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