One year old PIX disrupts digital payments in Brazil

PIX digital payments

In 2020, cash payments declined by 16.0% globally; Brazil experienced a 26.0% decline, the United States a 24.0% decline and the United Kingdom an 8.0% decline, with factors including stores shutdown pushing up online shopping and digital and contactless payments rates.

Despite Brazil’s declining cash usage, when looking at Latin American (LATAM) countries, cash is still the preferred way of payment, especially in areas where bank infrastructures, trust in financial institutions and access to credit are lacking. Concerns about data vulnerability and cyber security as well as lack of regulation in terms of consumer protection also play a role. The percentage of population with a bank account varies widely even amongst major economies within the region; Brazil and Chile have the highest population with a bank account, 68.0% and 63.0% respectively, while Peru has the lowest (29.0%).

Overall, between April and September 2020, around 40m people have adopted online financial systems in Argentina, Colombia, and Brazil alone, according to a Mastercard’s research. When looking at Brazil, particularly, it appears that the country is a very fertile ground for digital payments: GlobalWebIndex reports that Brazilian nationals spend more time on social media than people in any other country in the Western Hemisphere and have the fifth-largest online population.

In the last few years, predominant payment forms in the country have been credit cards and the boleto bancário, a ‘voucher’ form of payment that takes up to 48 hours to clear out in order to access the funds, limiting the usage of services that require real-time operability, such as online shopping.

Looking ahead, one of the factors that is likely to facilitate online sales in the country, and in turn foster e-commerce growth, is PIX, a digital payment system launched in November 2020 by the Brazilian Central Bank, just ahead of Single’s Days shopping spree. PIX is an interoperable instant payment scheme, featuring 760 banking institutions as of October 2021, both fintech and traditional banks. It can be used for person-to-person or person-to-business payments, and it bypasses the necessity of having a credit score to acquire a credit card or to have access to the boleto bancário. It works with either a traditional or an online bank account and has fees of around 0.99% of the transaction value for merchants. This is significantly lower than other payments methods such as some debit cards, which stand at 3.99% of the transaction value. Crucially, it also allows receipt of money within one hour from the transaction, bypassing the hurdle of late or non-fulfilled payments.

At just over one year old, PIX is already changing the way Brazilian nationals pay for their online purchases; according to Tiago Girelli, CEO of e-commerce platform Tray, PIX is the second most used payment methods by Brazilian consumers as of July 2021. NuvemShop, a major e-commerce platform in Brazil and the LATAM region, stated that it recorded a 50.0% increase in payments via PIX in Q2 2021. When considering that between June and July 2021, seven out of 10 Brazilian consumers carried out at least five online purchases, and that e-commerce giants of the likes of AliExpress and Mercado Libre as well as Magazine Luiza also accepts it as a form of payment, this is not data that should be overlooked.

Just during PIX’s first five months of activity, transactions through the system amounted to BRL1,109tn (around €173.7tn) while about 75m of Brazilians used it whether to pay for something, or to receive money, representing 45.0 % of the adult population, reports the Brazilian Central Bank. There are estimates that by 2030 PIX will account for 22.0% of electronic payments in the country.

The switch from the boleto bancário to PIX could reduce the problem of sellers being obliged to reserve merchandise for a period between 48 and 72 hours, which is the case with payments methods such as the boleto. This could make stock planning and forecasting more predictable and sales-related logistics activities easier. Easiness of payments has also the potential to reduce online cart abandonment rates, which according to Moosend stood at 75.3% in Latin America as of August 2021.

Source: Transport Intelligence, December 2, 2021

Author: Caterina Ciccone

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