The Latin American payments industry has undergone significant changes in recent years by introducing new technologies and digital payment methods. However, Pix, the instant payment system launched by the Central Bank of Brazil in November 2020, has had a different impact. Since then, Pix has rapidly gained popularity in Brazil, and its impact is being felt throughout the region.
In this article, we will explore the impact of Pix on the Latin American payments landscape and how it is changing the way we pay for goods and services. From its benefits to its challenges, we will dive into everything you need to know about Pix and its role in shaping the future of payments in the region.
What is Pix Brazil?
PIX is designed to make purchases, payments (such as bills), and small transfers (for the time being) more friendly and simpler to its end-user promptly and securely. Created by the Central Bank of Brazil, this fast payment system lets any participating bank or fintech providing transactional accounts offer PIX as a payment or a money transfer method.
It is used via an app that functions as a digital wallet. It creates a unique QR code (instead of asking for information regarding the user’s account or personal data) to make user transactions more accessible. PIX offers other features, such as PIX Troco (the end-user receives a change in cash after purchases) and PIX Saque (the end-user can make a cash withdrawal.) PIX allows the transfer of funds can be done between people and between companies, the payment of purchases in physical stores, e-commerce, and m-commerce, the payment of invoices (request-to-pay), and even the possibility of scheduling payments from companies to people. Moreover, it allows transactions involving the government both in collecting taxes and fees and for paying citizens and service providers.
PIX has lots of benefits, not only for its consumers but for digital commerce too. Regarding the former, one of its benefits is speed. Unlike other payment systems, PIX transactions are done in seconds at any time and day. It means the user won’t have to wait the usual banking hours to receive a payment.
Additionally, even though it charges low fees for businesses, it is 100% free to people. A significant perk is that it is as safe as can be. Because they rely on authentication and cryptography, all PIX transactions avoid the risk of kidnapping and fraud.
When it comes to digital commerce, using PIX is also safe. It reduces risks related to sales and is less prone to fraud, given that it can be used directly on smartphones and doesn’t require a card password or ATM. Speed is also a benefit — just like it is for consumers — regarding instant Payins and Payouts. Businesses can receive money any time after a sale and avoid intermediaries.
PIX gives digital commerce a competitive advantage. Since intermediaries are removed, they pay fewer charges. Therefore they can charge more competitive prices for their products and services. Lastly, it allows optimized cash-flow management, given that the money is instantly available and can be used to pay bills faster.
Pix is replacing cash in Brazil
So, how is PIX impacting the Brazilian economy? As mentioned previously, it was created by the Central Bank of Brazil, and as of 2022, it has already taken over much of the country’s monetary policy.
In fact, financial institutions with at least 500,000 accounts are required to participate in the PIX payment system (meaning that they must offer PIX as a payment method for their clients). In contrast, smaller institutions, such as fintech, can use it voluntarily.
PIX was created to include the unbanked population in the financial system — in fact, 49% of Brazil’s population opted out of having a bank account because they don’t trust financial institutions. So, with PIX, dealing with banks is out of the question. No more interminable lines, no more high credit and debit card fees — payment methods such as PIX are revolutionizing the financial system and legitimizing the way people move money around, replacing cash and reducing the cost of maintaining paper money in circulation.
Two years after its launch, PIX is growing by leaps and bounds and is now starting to appear in new Latin American markets. Governor Roberto Campos Neto has stated that all central banks will have the opportunity to copy what they did with PIX for free and that there are already talks between the Central Bank of Brazil and countries such as Colombia and Uruguay that are interested in using this payment system. Other countries, such as Canada, also have their eye on PIX since it’s cheap.
Open protocols with Pix: free replication with no boundaries
Additionally, Latin American fintech is also starting to use PIX.
Such is the case of Mozper, a Mexican fintech that expanded its business to Brazil, focused on teaching children how to manage money. Parents give their kiddos access to the cash and set rules on how to use them: for example, what they can spend money on and how much they have left. Plus, children are assigned tasks and savings goals that are monitored.
The ultimate goal is to provide, through their app, a practical financial education that considers real-world conditions in the digital age. This way, children learn good financial habits in an easy and fun way.
So, when Mozper branched out into Brazil, they reached out to ThinkUp to develop the adaptation of the app for the Brazilian market. They integrated PIX and offered its payments by creating a “Go to PIX” section in their app, all the while complying with the regulations imposed by the Central Bank of Brazil. Here’s where PIX comes in.
PIX is the current big thing in Brazil, and it will definitely branch out toward other Latin American countries in no time.
As of 2022 — just two years after its release — the app has over 400 million users and is growing daily, whether using PIX, PIX Troco, or PIX Saque. These include people who didn’t trust banks or didn’t have access to electronic credit transfer instruments or cards and had to make transactions using cash.
Plus, small retailers and merchants have used PIX as an alternative to the high card fees. Simply put, PIX has come to revolutionize the technology and financial world and make lives easier with their fast, free, and safe payment methods, giving paper money a run for its money (no pun intended).
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