PIX Revolution: The surge of instant transactions in Brazil
New payment solutions frequently emerge, but only a few of them attain widespread adoption. PIX is one of them.
Many call this emergence a revolution. Almost one-third of the Brazilian population uses this service, and around 3 billion transactions are made using PIX every month.
And guess what? This widespread adoption has not taken decades. PIX was launched in 2020 by the country’s Central Bank.
Intrigued to know more about this transformative payment system? In this blog, we walk through the PIX revolution in Brazil and how it transformed the payment landscape of the country.
We’ll shed a light on:
- The birth of PIX.
- The widespread adoption.
- How PIX works.
- The impact on Brazilians.
- Why are Brazilian merchants offering PIX?
- Future of PIX.
The birth of PIX.
Launched in November 2020 by the Central Bank of Brazil, PIX was designed with the explicit purpose of revolutionising the payment landscape in the country.
The name "PIX" is derived from the Portuguese word for "pixel," emphasising the granularity and swiftness of the transactions it facilitates. It’s an instant payment method that allows individuals and businesses to send and receive funds 24/7, 365 days a year, including holidays.
This marks a stark contrast to the traditional Brazilian banking system, where money transfers could take days to complete, especially during weekends and public holidays.
The widespread adoption.
PIX took the whole of Brazil by storm. From local mechanics to delivery drivers, everyone now accepts PIX. But why is it so popular in Brazil? It is unique? No. PIX was not the first of its kind. Similar ideas were planned and implemented in other parts of the world long before PIX. For instance, RIX payment system in Sweden, FAST in Singapore, CoDi in Mexico, and UPI in India.
However, pioneering does not always equate to successful adoption. For instance, CoDi was the first instant payment system in Latin America, but it failed to grasp the attention of the Mexican people. It wasn’t made for the digital world, and the pandemic, a year after its launch, halted its adoption rate.
However, Brazilians were consistently working on launching a new real-time payment system. That’s when the Brazilian Central Bank (BCB) took a proactive approach. It analysed market scenarios, generated analysis reports, and identified potential paths for the future, which led to the successful launch of PIX in 2020.
As a result, they gained more than 150 million PIX users in Brazil. The data collected by the central bank and reviewed by Matera states that PIX accounted for 35% of all transactions in the first quarter of 2023, followed by credit cards at 23% and debit cards at 16%.
The study also reveals that PIX transactions have increased by 23% from the previous year, while credit card and debit card transitions have reduced by 20% during this period.
How PIX works.
Say you owe your friend money and you want to return it... instead of collecting all their bank details including account number, sort code, and full name - you can simply ask,
"What's your PIX code?"
All they then have to do, is give you 1 of the following pieces of information:
- Cell phone number,
- Individual tax identification number (known as CPF in Brazil),
- Email address,
- Or random system-generated number.
Now, imagine the same seamless interaction between an individual and a company. When you're making a purchase, all you need to do is grab your cell phone, scan a QR code, and within seconds, you've made the payment. The beauty of it is that all the purchase details magically pop up on your phone screen.
And soon, you'll even be able to withdraw cash at regular stores. The process is as simple as receiving cash from the store cashier while scanning a QR code with your cell phone, much like the payment process.
The impact on Brazilians.
This isn’t just another payment system. PIX has transformed how people respond to financial transactions in Brazil. Here’s what PIX has done:
Financial inclusion.
In Brazil, a significant portion of the population was unbanked or underbanked before PIX's introduction. These individuals often relied on cash for their transactions, which had various limitations and security concerns. PIX, with its easy registration process and simplified transactions, has allowed many unbanked Brazilians to participate in the formal economy for the first time.
Convenience.
PIX has become the go-to payment method for Brazilians, offering unparalleled convenience. Whether it's splitting a restaurant bill, paying rent, or shopping online, PIX is a versatile and efficient solution. No more waiting for banking hours or dealing with paper cheques and cumbersome processes.
Enhanced security.
PIX transactions are highly secure, utilising state-of-the-art encryption and authentication mechanisms. This has instilled trust in users, reducing the risk of fraud and unauthorised access to accounts.
Economic growth.
The efficiency of PIX has a cascading effect on the broader economy. Faster transactions mean quicker access to funds, enabling businesses to manage their cash flow more effectively. This has had a direct impact on economic growth, as companies can reinvest capital more swiftly.
Why are Brazilian merchants offering PIX?
PIX isn't just a hit with individuals; businesses are also reaping the benefits of this revolutionary payment system. By integrating PIX as a payment option, businesses have benefited from:
Increased revenue.
PIX is being used by around 150 million Brazilians, which means (if you’re based in Brazil) you’re giving people a strong reason to become your customer, while adding to your revenue.
The lack of payment options is one of the top reasons for cart abandonment, so using PIX to attract your Brazilian customers is a smart move.
Optimised cash flow.
Invoices can become a thing of the past. Which is great, as invoices can be a killer when it comes to optimising your cash flow.
With PIX, payment is instant so products can fly off the shelves more rapidly, and consumers will have their items in their hands much quicker.
Want to know more about e-commerce payment methods? Read this guide and discover which payment platforms are popular and how you can find the right one. Read now.
Lower transaction fees.
Traditional banking systems often impose high fees for various transactions, especially for cross-bank transfers. PIX is free for consumers, while businesses pay a small fee.
Future of PIX.
While PIX is a success story, the Brazilian Central Bank is still optimising the system; adding enticing features working on innovative plans for the future.
In 2021, PIX underwent significant improvements. It scheduled future payments and allowed users to withdraw money at both merchants and ATMs. PSPs gained the ability to initiate PIX transactions, enhancing the system's functionality. Moreover, a robust fraud prevention mechanism was implemented to boost security.
In 2022, Financial Institutions began earning interest on the funds held in the Master Account with the Central Bank, which plays a crucial role in funding PIX transactions. Looking forward, the Central Bank is planning to enable PIX credit, batch payments, cross-border payments, payment within Smart Contracts, Offline QR code payments, and split payments.
Finally...
In a world where speed and accuracy go side-by-side, having an efficient payment system is vital. Wherever you’re based in the world, it’s important to assess which payments you’re offering to your customers and how choosing the right selection can drive your business forward.
Ready to upgrade your payments? Join us and offer efficient and reliable payment solutions to your customers.
