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Wherever and whenever
Pix is an instant payment system developed and operated by the Central Bank of Brazil.
The Brazilian Central Bank describes Pix as an easy, fast and affordable experience for end users and businesses, delivering a safe and versatile solution for payments and transfers – describing Pix as a “wherever and whenever” payment solution.
The Central Bank of Brazil describe Pix as “….an instant payment method developed by the Central Bank of Brazil that enables transactions to occur in less than 10 seconds, 24 hours a day, 7 days a week – including weekends and holidays. By selecting Pix at the checkout page, users can either scan a QR Code using their smartphones or copy and paste a Pix code into their banking or digital wallet apps. After that, all they need to do is check the receiver’s information and confirm the action.”
It was launched in November 2020 and has rapidly become one of the most popular payment methods in Brazil, offering a fast, secure, and convenient way to transfer money and make payments.
The Brazilian Pix system offers:
Instant Transfers: Pix allows for real-time transfers of money between different bank accounts, with transactions typically completed within seconds, 24/7, including weekends and holidays.
Ease of Use: Users can send and receive money using a variety of identifiers known as Pix keys. These keys can be linked to different pieces of personal information, such as phone numbers, email addresses, taxpayer identification numbers (CPF or CNPJ), or random generated keys.
Cost-Free for Individuals: For individual users, Pix transactions are usually free, making it an attractive option for personal financial activities.
Versatility: Pix can be used for a wide range of transactions, including person-to-person (P2P) transfers, person-to-business (P2B) payments, business-to-business (B2B) payments, and government-related transactions.
QR Codes: Pix supports payments via QR codes, which can be static (for fixed amounts) or dynamic (where the amount can vary). This feature is particularly useful for retail and service payments.
Integration with Banks and Payment Platforms: Pix is integrated into the infrastructure of various financial institutions, including traditional banks, digital banks, and payment service providers, making it widely accessible.
Security: The system incorporates robust security measures, including encryption and strong customer authentication, to ensure safe transactions.
Economic Impact: Pix has significantly impacted the Brazilian economy by promoting financial inclusion, reducing the need for cash, and lowering transaction costs for both individuals and businesses.
Adoption and Usage: Since its launch, Pix has seen rapid adoption across Brazil. It is used for everyday transactions, such as paying for goods and services, transferring money between friends and family, and even paying government fees and taxes.
Banco Central do Brasil created Pix within the Brazilian Instant Payment scheme in a way that it enables its users (people, companies and governmental entities) to send or receive payment transfers in few seconds at any time, including non-business days.
By transferring funds between transactional accounts Pix is a payment method that tends to have a lower acceptance cost because its framework works with fewer intermediaries.
Pix was announced in the summer of 2019 and became fully operational by November 2020 rapidly becoming the most used payment option in Brazil.
After 12 months (October 2021) it was reported that the Brazilian Central Bank had built a mobile payment system with 110 million users, processing more than 6 billion transactions.
In 2021 Bloomberg said: “one year ago the Pix platform didn’t exist. Now half the population uses it, showing just how quickly adoption of digital payments can spread.”
By January 2022 Pix was used by 71% of the population in Brazil and on its second anniversary (30 November 2022) the system broke a new daily transaction record with 99.4 million Pix operations were carried out in just one day.
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By mid-2023, Pix had achieved more than 150 million users comprising of both private individuals and companies. The transaction value of Pix payments was 110 percent higher in 2022 than in the year before totalling nearly 11 trillion Brazilian reals - or roughly 2.1 trillion U.S. dollars. Almost 90% of Pix transactions are P2P or P2B. In January 2023 registered Pix users used the instant payment method almost twice as much compared to January 2022. The real-time payment option made up roughly 18 transactions per registered user.
Source: PagBrasil
One of the greatest advantages of Pix is its transactions’ speediness. And it is fast even before the transaction is initiated. Instead of asking for information regarding the beneficiary’s account and/or personal data, the payer just asks for the Pix alias or scans a QR code (static or dynamic) in order to start a Pix funds transfer at any day and time.
Once started, Pix transactions are irrevocable and processed individually in a few seconds. Pix will promptly notify the end users (both payer and payee) of the transaction’s conclusion. With the payment confirmation, the payer has certainty that the payment was received and funds are available for the beneficiary.
All financial institutions and payment institutions can offer their clients and users Pix, including fintech companies. However, institutions with over 500,000 active accounts are obligated to offer Pix.
Pix was created with the aim of reducing cash transactions and offering an alternative to existing payment instruments, such as bank slip or Boleto and ATM’s, as well as being faster and more affordable.
The main advantages of Pix are its full-time availability, the speed of transactions using the system, low-cost functionality, convenience, versatility, open environment, and safety.
Source: PagBrasil
The address key is a way to identify the user’s account. There are four types of address keys that users can use: government identifies (business legal identifier or register of natural persons, email address, mobile phone number or a random key (a unique set of random number, letters, and symbols). This key binds the basic information to the user’s complete account information, allowing users to send and receive money using only an address key.
Following the immediate success of Pix the Brazilian Central Bank very quickly announced that enhancements to Pix would follow including:
Pix will no longer have a transaction limit.
The limit for cash withdrawals through the Pix Loot and Pix Troco applications would be increased – the maximum amount will be increased from R$500 to R$3,000 during the day and from R$100 to R$1,000 at night. These limits will match those applied via the ATM network.
The National Treasury would be able to pay salaries to civil servants, retirements and pensions through the Pix system.
Interestingly, the current maximum value per transaction was proving ineffective because this could be circumvented by initiating multiple transactions.
At the time the European Payments Council explained that they expect that Brazil’s Pix system would continue to innovate: “in the next few years, new functionalities will allow Pix to be a feasible alternative for interbank direct-debit schemes; enable buy-now pay-later solutions; offer a central solution for the presentment and payment of bills, both for individuals and companies; allow the use of new technologies, such as near-field communication (NFC), to enable new forms of initiation; enable offline transactions; and enable integration with instant payment systems from other jurisdictions.”
In 2024, the launch of Pix Automático is scheduled, which will facilitate recurring payments with Pix through prior authorization from the paying user.
It is interesting to note that:
Pix was developed and is owned by the Brazilian central bank who are the sole operator of Pix, rule book owner and instant payment system operator (PSO).
Pix’s proposition offered a beneficial alternative to existing payment types such as bank slips and ATMs and for businesses Pix offered cost savings over existing payment types.
The development of Pix was based on a centralised effort to promote digital payments to consumers. Direct access for all to Pix is available without the need to access via a banking app or portal and institutions with over 500,000 accounts must offer Pix to their customers.
There is a low cost to adoption with consumer transactions being processed for free and merchant fees being set lower than alternative payment options.
With a high population of unbanked individuals Pix addressed a clear financial inclusion objective. 71% of the population were using Pix in under 18 months.
Innovation in Pix has been a continual focus with two waves of enhancements occurring very early in Pix’s lifecycle. Also, the scope of Pix is changing again with variable recurring payments being added in 2024.
Early adoption was supplemented by government objectives through the mandatory use of Pix for Covid-19 relief finds.
The banking and PSP eco-system are fully engaged in Pix.
Pix represents a significant advancement in the Brazilian financial system, providing a modern, efficient, and inclusive method of payment that has transformed the way people and businesses handle money in Brazil.
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Subscribe to the premium edition of Payments:Unpacked by the 7 June 2024 and receive 20% off of a years subscription.