“Faz um PIX,” or “send a PIX”, has become a common saying for Brazilians when asking friends to pay them back. The expression also gave the title to a recent ‘sertanejo’ song, a Brazilian country music genre. This is telling of the success of PIX, the instant payment solution implemented by Brazil’s central bank, Banco Central do Brasil (BCB).
Launched in November 2020, there are now almost 135 million registered PIX users out of a population of 213 million. A total of approximately 985bn reais ($190.5bn) has been transacted via PIX so far.
“We reached two billion in terms of the number of transactions per month. India implemented a similar system (UPI) four years ahead of us and reached seven or eight billion [transactions] despite [a population of] one billion,” explains Marcos Cavagnoli, digital cash management and open finance director at Itaú Unibanco.
PIX allows instant payment between individuals, companies and government bodies. To make a payment, the payer needs the payee's PIX alias or key. For individuals, the keys/aliases can be personal data, such as an email address or mobile phone number, random keys or a QR code.
There are different reasons that PIX has been a success. First of all, the central bank made it mandatory for certain institutions to participate and took a central role in the process. “The central bank not only acted as a regulator but was also involved in the structuring of the technical functionalities of PIX,” explains Mr Cavagnoli. “This allowed the whole country to follow the same agenda and advance at the same pace.”
Secondly, PIX, which is free to use, proved from the beginning to be a quicker alternative compared to traditional banking transfer methods, which only worked during business hours.
Brazilians are early adopters in technology and they are mobile first
Another smart move was to allow fintechs to participate rather than have the service restricted to banks. Users must have an account (current, savings or prepaid payment) with a payment services provider, financial institution or payments institution that is participating in the PIX scheme.
The implementation of the system required a lot of effort from Brazil’s banks. “So I would say it wasn’t easy; there were a lot of back and forth discussions with the central bank, but at the end of the day it was helpful. It also reduced banks’ cash management costs, which are probably one of the highest that we have in terms of payments,” explains Mr Cavagnoli.
“Brazilians are early adopters in technology and they are mobile first – we spend 10 hours per day on our phones. This explains such high adoption and willingness to test new things,” says Julia De Luca, technology manager at Itaú BBA, the bank’s investment arm.
Next steps
“There is still space to implement [improvements] with regard not to the security of the system itself, but how we can help users to be less vulnerable to the dangers of social engineering,” suggests Mr Cavagnoli, speaking on the issues of fraud and phishing. “For example, at the beginning it was not possible to limit the number of transactions that you could perform during certain periods of the day. Nowadays, users have this possibility.”
According to Mr Cavagnoli, the next step is planning how PIX can execute a more aggressive adoption curve against the boleto (bank ticket), one of the most important cash payment methods in Brazil, also regulated by the central bank.
The majority of transactions through PIX are still occurring between individuals, so there is scope to increase the participation of businesses in the system.
Next year, there will be much talk about the possibility of linking credit transactions with PIX, according to Mr Cavagnoli. “This will help to make PIX more competitive against credit cards,” he says. “On top of being able to use QR codes, there will probably be a regulation to allow the use of PIX credentials to make a near-field communication transaction. This will make payments even faster in terms of user experience and increased adoption rates.”
Broader implications
There are emerging fintechs in Brazil focused on improving different aspects of the PIX system. “To give you an example, a good business opportunity could be a dashboard where I can see all of my bank accounts where I am receiving PIX,” explains Ms De Luca.
“I'm seeing a number of investors based in either the US or Europe calling us just to understand what PIX is and what’s happening around it. I think it's no surprise that the [US Federal Reserve] is inspired by PIX,” adds Ms De Luca. Colombia has also reportedly approached Brazilian authorities to enquire about the payments system.
“We should be super proud of what we have accomplished up until now in such a small amount of time,” says Ms De Luca.
