Payments in Brazil are about to make a significant pivot, turning a country in which consumers rely heavily on cash and remain skeptical about payment cards into the next region to pioneer faster payments.
When the Central Bank of Brazil revealed plans this year to launch the
Considering 47% of Brazil's consumers prefer cash payments at the point of sale, and even though credit cards are popular, at 57%, for online purchases, many consumers still use other methods including the Boleto QR code and its PostPay cash-acceptance scheme at 16%, or bank transfers at 10%, according to recent Worldpay research.
"'Cash is king' has been the motto for Latin America, even as other regions see a steeper decline in cash transactions," said Erika Baumann, senior analyst for Aite Group. "The PIX initiative in Brazil has a few factors working in its favor in that it is mandated for all banks that have more than 500,000 accounts."
Initially, PIX will operate as a faster payments P2P or B2B process, and e-commerce payment tool. Ultimately, the banks will seek faster ways to make payouts, interconnect all payments and transactions with each other and integrate into instant payment services.
It's a critical change for Brazil — and the Central Bank of Brazil has a lot riding on the success of PIX. Not more than a week after
"PIX is leapfrogging, in some respects, the use of things like QR technology; and the other important factor is speed," Baumann added. "Everyone loves speed, and the core value proposition is the same in every region."
The banks offering PIX cite the inconsistency of consumers using Boleto QR codes for merchants, saying its transactions can take between 20 minutes and two days, depending on transaction type. The PIX platform is expected to complete most transactions within 10 seconds.
Uruguay-based e-commerce payments provider dLocal has been in the Brazilian market for several years, and it is seeing renewed interest in clients wanting to get into the market through PIX in order to expand business during the coronavirus pandemic.
"In the last few years in Brazil, we have really seen the shift from cash to digital payments taking place," said Rodrigo Sanchez Prandi, vice president of product at dLocal. "The next step is to take care of young bank users with instant, fast payments — and that is what we will see with PIX."
dLocal established
Technology providers and businesses alike view Brazil and other Latin American countries as a booming digital payments region in spite of the global pandemic. "There is a lot of e-commerce and cross-border [payment activity] taking place, as well as new digital banks and lending services for small businesses and individual users," Sanchez Prandi said.
dLocal serves international companies looking to move into the Brazilian market, processing payments for major clients like Netflix, Facebook, Amazon, GoDaddy, Google and others.
The Central Bank of Brazil is already encouraging the estimated 45 million adults in the country to use the new financial system when it launches, pushing the notion that PIX will have much broader reach than some of the digital wallets already in operation in Brazil. It is also touting the system as a financial inclusion tool, one that is easier and less expensive than some of the card brand programs.
dLocal, other payment processors, digital banks and fintechs will be able to access the PIX platform through APIs.
"It will be really interesting for those in fintech to see how things are evolving," Sanchez Prandi said. "Basically, it is about closing the gap between the user with cash under their mattress and the user of the bank to make payments."
Current discussions on open banking regulations will create new opportunities for P2P transactions in 2020; and by 2023, mobile devices will account for nearly half of the country's retail online sales, Worldpay noted. Already the third-largest base of monthly Instagram and Facebook users in the world, according to eMarketer, Brazil is a country in which consumers are likely to embrace mobile payments.
Like any other digital payment advancements, the success of PIX is in the hands of Brazilian consumers who already have other digital wallets like Boleto or PayPal on their mobile devices.
"Here in the U.S., other digital wallets have gained more popularity in many markets than the bank-preferred and [bank]-owned Zelle system," Aite's Baumann said. "The popularity and use of digital wallets have for sure been growing in Brazil, so I am not sure if the popularity of PIX will displace the momentum of existing players."
As a provider, dLocal's Sanchez Prandi senses it could take hold with the power of the central bank behind it.
"If it's an open banking system for everyone to connect to, then it's a green path toward faster payments across the board," he said.
