Pix, DREX, and more: Brazil’s payments landscape

The success of Pix

Since its launch in November 2020, Pix has grown to become the most popular means of payment by number of transactions.¹ The central bank states 45% of all payments in Brazil are over the Pix platform.² It is used by more than 150 million citizens, or 75% of the population, and 15 million companies.³

Its overwhelming success initially was in the account-to-account (A2A) market. Individual users have the option of using three different sorts of keys, explained Helio Inoue. They can use their mobile phone number, their email ID, or their government ID. These can be stored with one bank each. 

“You ask the other person for their key,” said Inoue. “They give it to you, you enter it in your bank app, add a value, and send. They get a message saying they’ve been credited. We call it ‘doing a Pix.’”
In a few short years, “do a Pix” is very much part of the lexicon in Brazil. Settlement is virtually instantaneous. There is no cost in P2P transactions to either party. Given its success with individuals, the central bank is backing Pix to succeed in person-to-business (P2B) and, down the line, B2B as well.

Pix’s popularity has made the jump to the e-commerce world, as a user can make online payments as well. Brazil’s ecommerce sector is already worth nearly $100 billion; as it grows, so will Pix’s market share.¹ 

Point-of-sale (POS) transactions are a different story, though. Helio Inoue pointed out that, as of now, there is still a charge for merchants to offer Pix at the POS. However, there is pressure from consumers and regulators to lower these charges. The central bank has also rolled out contactless payments with a functionality titled Pix by Proximity. Originally available through Google Wallet to users who have linked their bank accounts, it will be made available to all customers in 2025. Given the support from the central bank, we can expect to see growth in Pix’s market share across verticals, including at POS, said Helio.

Payment cards: resilient, but in surprising ways

“I live in São Paulo”, said Inoue. “When I go to lunch, I pay with cash! Around me, if it’s a low-value transaction, people ‘do a Pix.’ Higher values are normally paid with cards. But these aren’t physical: customers pay with the cards in their digital wallets.”

Inoue mentioned that residents of big Brazilian cities have a heightened sense of alertness to bad actors, whether in the flesh or online. Tech leaders and the financial sector have responded with ingenious workarounds, including the immediate issuance of time-bound virtual cards from within a bank’s app. “It works for 72 hours after being generated on my bank app,”  said Helio. “It has its own number and security ID, distinct from a physical card. And it gives us more security in our online shopping.”

In other words, even if it is stolen (along with your phone) or spoofed, it won’t last long. And it doesn’t contain any information that can link it back to the physical card itself. 

Wanted: CBDC with offline functionality

A banker involved in disbursing governmental support told an interesting story to Inoue. “There are cases in the Amazon where people have to travel three days in a boat to collect their payment in currency,” he said. “How can we help in this situation? How can we make it more efficient for the government and the people that require this help?”

It hinges on infrastructure. If these populations have electricity and mobile connectivity, they can use Pix. Another alternative is a digital means of payment that combines security with offline functionality. Brazil’s pilot of its central bank digital currency (CBDC), called Digital Real Electronic Transaction, or DREX, is now in its second stage. Individual banks within the nation’s financial system have been invited to participate. The biggest commercial bank in the country – Banco do Brasil (BB) – has partnered with G+D to test an offline payment solution that explores this specific use case, namely, tackling a lack of electricity and connectivity.

A stated goal of the pilot is to extend access to financial services to underserved populations with limited or no access to the internet, and to do so by providing both a complement to cash, and a digital means of payment that doesn’t require having a bank account. G+D’s in-house tokenized CBDC solution, Filia^®, is well suited to such a scenario.

A medium-term outlook

Brazil is large and diverse. It is also nimble when it comes to problem-solving and has been evolving its own solutions to the issues it faces. Inoue set out a scenario for us. “With many young people moving to the cities, there are places in rural areas where the old people don’t have access to an ATM. In these situations, there will be a man on a motorcycle, someone everyone knows; once a week, he collects everyone’s debit cards and rides to the nearest town and withdraws money. He has their codes, which means he has their trust. He comes back and distributes the cash. Perhaps he pays their bills as well.”

Cash remains popular, especially with people who are used to paying with it, and it is more prevalent the further you get from the cities. It is especially important in the agricultural sector. Helio Inoue doesn’t see this changing. 

Cash, cards, and digital means of payment will co-exist, as Brazil adjusts to its own rapidly shifting landscape.