As a reader of Payments:Unpacked you will know that payment systems are vital to a country’s economy and play a remarkable role in ensuring that payment for the goods and services consumed are efficient, safe, resilient and friction-free.
Given the popularity of last week’s “Don’t worry about it, I’ll Tikkie you” briefing we will now take a quick look at the Brazilian Pix instant payment system – a special thank you to Gaurav Sharma for providing the basis of this briefing.
Pix : Wherever and Whenever
The Brazilian Central Bank describes Pix as an easy, fast and affordable experience for end users and businesses, delivering a safe and versatile solution for payments and transfers – describing Pix as a “wherever and whenever” payment solution.
Pix is an instant payment method developed by the Central Bank of Brazil that enables transactions to occur in less than 10 seconds, 24 hours a day, 7 days a week – including weekends and holidays.
By selecting Pix at the checkout page, users can either scan a QR Code using their smartphones or copy and paste a Pix code into their banking or digital wallet apps. After that, all they need to do is check the receiver’s information and confirm the action.
Within the Brazilian instant payment (IP) ecosystem, Banco Central do Brasil (BCB) created Pix, the Brazilian Instant Payment scheme that enables its users (people, companies and governmental entities) to send or receive payment transfers in few seconds at any time, including non-business days.
By transferring funds between transactional accounts Pix is a payment method that tends to have a lower acceptance cost because its framework works with few intermediaries.
Announced in the summer of 2019 and fully operational by November 2020, Pix has become the most used payment option in Brazil.
After 12 months (October 2021) it was reported that the Brazilian Central Bank had built a mobile payment system with 110 million users, processing more than 6 billion transactions with Bloomberg labelling the Pix system as ubiquitous:
One year ago the Pix platform didn’t exist. Now half the population uses it, showing just how quickly adoption of digital payments can spread.
Bloomberg (October 2021)
By January 2022 Pix was used by 71% of the population in Brazil and on its second anniversary (30 November 2022) the system broke a new daily transaction record with 99.4 million Pix operations were carried out in just one day.
One of the greatest advantages of Pix is its transactions’ speediness. And it is fast even before the transaction is initiated. Instead of asking for information regarding the beneficiary’s account and/or personal data, the payer just asks for the Pix alias or scans a QR code (static or dynamic) in order to start a Pix funds transfer at any day and time.
Additionally, Pix tends to have a lower acceptance cost for merchants and businesses in general, because its transactional framework has fewer intermediaries than traditional methods of payment.
Once started, Pix transactions are irrevocable and processed individually in a few seconds. Pix will promptly notify the end users (both payer and payee) of the transaction’s conclusion. With the payment confirmation, the payer has certainty that the payment was received and funds are available for the beneficiary.
What are the benefits of Pix?
Pix was created with the aim of reducing cash transactions and offering an alternative to existing payment instruments, such as bank slip or Boleto and ATM’s, as well as being faster and more affordable.
The main advantages of Pix are its full-time availability, the speed of transactions using the system, low-cost functionality, convenience, versatility, open environment, and safety.
Pix continues to innovate
The Brazilian Central Bank have announced that from January 2023:
- Pix will no longer have a transaction limit.
- The limit for cash withdrawals through the Pix Loot and Pix Troco applications have been increased – the maximum amount will be increased from R$500 to R$3,000 during the day and from R$100 to R$1,000 at night. These limits will match those applied via the ATM network.
- The National Treasury will now be able to pay salaries to civil servants, retirements and pensions through the Pix system.
Interestingly, the current maximum value per transaction was proving ineffective because this could be circumvented by initiating multiple transactions.
According to the European Payments Council there is more innovation in the pipeline:
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.
European Payments Council