3/3/2020
In line with the changes that have been made to the financial system in order to promote competitiveness between financial institutions, the Central Bank of Brazil (“BACEN”) announced a brand new instant payment system: the PIX System.
What is the PIX System?
The most important advancement of the new PIX Systems is that transactions will be fast and readily available at any time and on any day. BACEN’s PIX System will operate 24/7, every day of the year, and transactions will be made directly, with no intermediary, and real time: up to 10 seconds.
Instant payments are a novelty in Brazil. Here, electronic transfers are normally made through direct bank transfers (TED) or credit orders (DOC). In a TED transaction, the transfer is concluded on the same day, no later than 5 p.m.; in a DOC transaction, payments sometimes take longer than one entire day to be concluded. In addition, both TED and DOC transactions can only be concluded on business days; any transaction made on weekends or holidays will only be concluded on the next business day.
Transactions made through other means of payment, such as check, not only may take longer to be concluded, but they will also involve even greater uncertainties. Payments in cash, although instant, may subject both payer and payee to the risk of loss or theft. Payments through payment slips take a certain amount of time to be concluded, especially when made on non-business days. They also involve higher costs.
Who can use the PIX System?
The PIX will be implemented in November 2020. Until then, all banks and fintechs with over five hundred thousand accounts will be required to offer their customers the PIX System. Any banks and fintechs with smaller portfolios and all other financial institutions and payment institutions may -–but will not be obliged to- use the PIX since its launch. Any individual that wishes to use the PIX System will be required to have a bank account or savings account in a bank, payment institution or fintech.
How will payment work?
According to information provided by BACEN, users will be able to make transactions in the PIX System by inserting certain information such as mobile phone number, email, taxpayer ID number (CPF/CNPJ). It will function as a contactless payment – similarly to certain credit card transactions, for instance – or with the use of static or dynamic QR Codes. Static QR Codes may be used in multiple transactions; they will be used in transfers between two persons. Dynamic QR Codes will be used when paying for a purchase in a business establishment.
It remains to be seen how users in Brazil – both individuals and business entities – will accept the PIX System after its implementation on November 16 and whether the new system will bring practical advantages.
There is no doubt that BACEN’s intention with the new system is to make transactions in the sector speedier and remodel Brazil’s payment system.
