Pix: the successful Brazilian instant payment platform

pix brazil

The Brazilian instant payment system, Pix, launched in November 2020, has swiftly captured the attention of 67% of the adult population in less than 18 months. Amassing over 114 million users, Pix exemplifies how technology can serve as a vital tool in democratizing finance.

At the BIS Innovation Summit 2022, the Governor of the Central Bank of Brazil, Roberto de Oliveira Campos Neto, shared insights into the inception and evolution of the Pix project.

Origin of Pix

The decision to create a new payment infrastructure from the ground up was influenced by the early 2019 trend among emerging markets. There was a noticeable convergence of content, payments, and social features within mobile applications, inspired by the Asian "super app" model. Big Tech companies and startups were innovating across sales, payments, and advertising, leveraging AI to understand customer needs better.

However, the development of siloed, vertical solutions posed a risk to future competition, prompting the Central Bank of Brazil to initiate an instant payment project that would foster a competitive landscape.

Functionality of Pix

Pix operates through a simple yet effective system. Individuals and businesses can acquire a Pix “key” and a quick response (QR) code, identifying each user via an alias such as a phone number, email address, tax IDs, or even random keys like a QR Code. A KYC process, facilitated by their bank or payment provider, verifies user identity.

Once set up, Pix account holders can facilitate instant transfers to family or friends without requiring the recipient's bank account number—only their Pix key. The system is free for individuals and highly affordable for businesses, streamlining payments even in retail environments via QR code scans.

Overcoming Challenges with Brazilian Banks

Despite Pix's successful outcomes, initial skepticism from banks was a hurdle, given concerns over potential revenue losses. To achieve a critical mass of users, the Central Bank mandated Pix participation for banks and payment institutions with over 500,000 transaction accounts, generating a network effect that encouraged broader adoption.

New Business Models and Benefits

Banks have come to embrace Pix, recognizing the spike in digital transaction volumes it generated despite initial fee revenue losses. Pix has spurred new business models, with even street vendors accepting Pix payments, leveraging its capacity for credit transactions and scheduled instalments.

Governor Roberto de Oliveira Campos Neto highlighted several factors contributing to Pix's success, including transparency, security, openness, public engagement, forward-looking regulation, and privacy protections.

Pix as a Public Infrastructure

Addressing debates on whether payment infrastructures should be public or private, the Central Bank's involvement underscored the aim to establish a common, competitive platform, preventing the fragmentation seen in private vertical solutions. While the Pix brand is government-owned, it can be utilized alongside financial institutions' branding.

Considering a Brazilian CBDC

With Pix already enabling smart contracts and programmable money, the question of what a Central Bank Digital Currency (CBDC) could add remains open. The Central Bank is cautious to ensure that a CBDC's introduction wouldn't undermine banks' deposit leverage and credit provision, suggesting possible solutions such as bank-issued StableCoins backed by the CBDC.

As decentralized finance, DAOs, and new technological trends like the Metaverse evolve, Pix and potentially a CBDC, could offer standardized frameworks facilitating innovation and efficiency in the emerging digital economy, urging banks to adapt and innovate swiftly.