Pix: Brazil’s Successful Instant Payment System (2024)

Recent Developments

1. In November 2020, the Central Bank of Brazil (BCB) launched an electronic payment scheme called Pix. The authorities’ objective was to reduce reliance on cash for transactions, increase financial inclusion, strengthen competition in a relatively concentrated banking system, and modernize the payment system for faster and more secure transactions. The ability of the new system to track payments and economic activity by geographical region, user characteristics, and transaction types, has turned out to be a highly useful benefit, though one which was not explicitly stated as an objective.

2. Pix has greatly exceeded usage expectations and fostered financial inclusion (Figure 1). In the two and a half years since its launch, the Pix system has been used by more than 140 million individuals (about 80 percent of the adult population) and 13 million firms, according to BCB statistics as of May 2023.² There are now more than 3 billion transactions taking place each month, with an average ticket size of about US$88. Pix has also supported financial inclusion by facilitating transactions by 71.5 million individuals (as of December 2022) who had not made any electronic credit transfers over a one-year period prior to the launch of Pix and are Pix users now. Payment volumes for Pix are now almost five times greater than those for debit and credit cards combined. In comparison with electronic payment systems globally, including with advanced economies, Brazil has had the fastest adoption rate in terms of transactions per capita gained since implementation.³

3. Pix has also helped to strengthen competition in the financial sector. It has led to the growth of several payment services institutions, which have established banking subsidiaries, increasing competition for deposits with big banks. The open sharing of transaction information on Pix users has helped to strengthen competition in the sales of banking products and services, including for better and cheaper payment services, among various institutions.

How Pix Works

5. The Pix technology allows the provision of payment services. These are delivered by certain designated financial and payment institutions called “participants” or “payment services providers (PSPs)” to a wide variety of “users,” which include individuals, firms, and government entities. Pix has the following features:

• The BCB is the owner of the payment scheme. It manages and operates a realtime settlement infrastructure (SPI), as well as a user address database (DICT). The latter contains identifying information on the users, including aliases, such as phone numbers, email addresses or randomly generated IDs, used for access to the Pix system and to prevent fraud.

• Payment services may include instant or scheduled payments and transfers, cash withdrawals, and payment invoices.

• Users may also incur short-term borrowing via Pix. This occurs, for example, between retail users and merchants operating via a PSP. The merchant could offer a user (payer) to pay for goods (or services) in installments, to be made to the PSP, though the merchant would receive immediate payment at a discount to the product sale price from the PSP.⁴

The authorities are now able to track monthly payment and related economic activity on a granular basis by geographical location, types of transactions, and borrowers, including by age group.

6. Participants in the system are subject to BCB regulatory requirements. They include institutions regulated by the BCB as well as other institutions that technically fall outside the regulatory perimeter but become subject to certain regulatory requirements and supervision (as discussed below) if they are allowed to participate in Pix. While Pix activity is mostly carried out via domestic and foreign banks (about 57 percent of the annual volume of transactions), payment institutions and fintech entities are not far behind (39 percent), and the remainder is mostly comprised of credit unions (about 4 percent). Utility companies are not included as they are considered end users. Regulated participants with more than five hundred thousand accounts are required to participate in the system (“mandatory participants”); others may participate voluntarily. As of end-May 2023, there were 799 active participants, of which 34 were mandatory.

• Participants that fall outside the regulatory perimeter may still provide payment services but only indirectly by going through a regulated institution. They must still satisfy certain requirements established by the BCB, which include (i) a signed contract with an existing direct participant; (ii) the technical and operational capacity to operate within the Pix system; and (ii) equity of at least BRL 1 million.

• All participants are subject to proportional risk-based supervision by the BCB and basic regulation for liquidity risk management, cybersecurity, data usage, and AML/CFT procedures. The BCB also sets some standards for participants to provide users with simple and intuitive access to the Pix system, which includes registration, transactions, and user authentication.

7. The BCB monitors system liquidity carefully. The BCB now remunerates the balances of all direct participants’ accounts in SPI, recognizing that by reducing the opportunity cost of funding there is an increase in liquidity provision for SPI Accounts. It provides liquidity lines to participants that have direct access to the SPI. It also allows a 30-minute window after the normal operating hours of the BCB’s Reserve Transfer System (STR) (6.30pm-6.30pm Monday through Friday) for transfer of Reserve Requirements and Electronic Currency balances to SPI Accounts. Banking participants may carry out short-term reverse repos of government securities with the BCB in exchange for liquidity to be used outside of normal business hours.

Design Features Contributing to the Success of Pix

8. Several design features have contributed to the success of Pix. The following features are noteworthy:

• Pix transactions take place almost instantaneously. A Pix payment settles in 3 seconds on average versus 2 days for debit cards and 28 days for credit cards.

• There is no limit on the size of a transaction set by the authorities; however, participants may impose limits on users based on their risk profile. According to the authorities, this provides flexibility to the system, allowing it to handle different types of users, encompassing both households and corporates, which would have different operating sizes for normal transactions. The authorities also note that the real-time availability of both payment and credit information on users makes it possible for participants to set these limits.

• Transaction costs are low. The authorities have set a requirement on Pix to be free for individuals, and the cost of a payment transaction for firms/merchants is only 0.33 percent of the transaction amount, versus 1.13 percent for debit cards and 2.34 percent for credit cards.

• Participation by big banks is mandatory. The biggest banks in the system worked together to overcome interoperability challenges and developed an effective network from the start.

• The BCB is the infrastructure provider and regulator. This has prevented some big technology companies from quickly gaining market share and extracting fees from participants.

• Rules for governance and technical standards were defined at an early stage. Key rules were decided via public consultation, and Pix participants must follow a procedural “manual.” There is also Pix forum, which allows for dialogue between public and private stakeholders, including the government, banks, press, business associations, and law firms.

• There is an emphasis on network security. The authorities have put in mechanisms to ensure appropriate user identification and compliance with KYC rules. Participants are required to flag suspicious transactions and to assign transactional limits according to the risk profile of a user. The Pix rulebook allows extra time for settlement of suspicious transactions. There is also a centralized fraud database (DICT), a precautionary block and a special refund mechanism, which draws on technology to trace through transactions, even though these have been set up as irrevocable.

• The user interface and experience are standardized. This has made it easy for users to switch between providers. Regardless of the PSP, individuals experience a standardized journey on the apps, and companies use a standardized API to link Pix with their systems. Pix has been developed as a brand with a logo.

Features in the Pipeline

9. Several new features are under development. These include:

• Functionality for recurrent payments. These would include, for example, regular payments on a mortgage, subscription services, or utility bills to take place automatically. This feature would enhance interoperability with other BCB projects (e.g., Open Finance and the Digital Real platform). An ultimate end goal would be to allow customers to access financial services from different financial institutions using either Pix or Digital Real wallets.

• Pix international. Cross-border transactions are not enabled yet, but Pix international would permit cross-border payments with currency conversion. In this context, the authorities are discussing the possible integration of Pix with the instant payment schemes of other jurisdictions, including the BIS Nexus system.

• Security-related improvements. These would be aimed at making the centralized antifraud database more robust and adding new features to the special refund mechanism.

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Selected Country Comparison of Instant Payment Systems

P=persons, B=businesses, G=governmentsNotes: BCB: Banco Central do Brasil; CNCC: China National Clearing Center; IBPS: Internet Banking Payments System; IMPS: Immediate Payment System; NPCI: National Payment Corporation of India; PBoC: People’s Bank of China; RBI: Reserve Bank of India; SGF: Settlement Guarantee Fund: UPI: Unified Payments Interface. Sources: World Bank Project FASTT, and Fund staff.