The mobile payment service Pix (Sistema de Pagamentos Instantâneos), created by the Central Bank of Brazil, literally hooked almost the entire country in just a year.
Everyone has their own keys and QR codes for transfers - from serious organizations to those guys who stand at the station with a sign “Apply for a ticket home.”
Pix is actually used by almost all Brazilians. That’s exactly what it says on the service’s official website.
The developers managed to provide for almost everything that was possible: cut off most opportunities for Internet fraud, confidently outperform all existing international transfer systems such as Apple or Android Pay and win widespread love (if you read to the end, you will receive the most effective confirmation of this).
Now I’ll tell you how this Pix works.
Despite the fact that Pix appeared in the midst of a pandemic, it cannot be said that it was the reason for its emergence: the new service was announced in the summer of 2019, when there was no talk of any covid yet.
But the system, of course, came out on time: in 2020, the number of digital payments around the world increased many times over.
In Russia, SBP has similar functionality, which allows you to pay in stores and transfer money by phone number. And in the USA, the private service Zelle is very popular, with which you can pay in most online stores in America.
The coolest thing, of course, happened in Thailand. But in Brazil everything is also quite good, and largely thanks to the convenient Pix.
In general, of all the countries in Latin America, Brazil has the best conditions for the emergence of e-commerce. In remote villages and villages, of course, the Internet is often absent. But on the other hand, 87.5% of the population lives in cities , and out of 216 million residents of this country, 181.8 million people are connected to the network . Brazil ranks fifth in the world in terms of the number of mobile phones , and fourth in terms of the number of Internet users. In addition, according to GlobalWebIndex, Brazilians spend more time on social networks than residents of any other country in the Western Hemisphere.
At the same time, at the time of the appearance of Pix in Brazil, you could spend money in one of four ways:
Boleto has two very big disadvantages:
Either way, in 2019, approximately 77% of retail transactions in Brazil were cash-based.
“Society demands something fast, cheap, secure, transparent and open,” said Roberto Campos Neto, president of the Central Bank of Brazil (BCB), and announced the creation of an instant payment system called Pix.
By the way, Pix is not an acronym. The name begins with the first letters of the words “pagamentos instantâneos” (which means “instant payments”), and “x” is our favorite mathematical variable, which should symbolize the possibility of using the system for absolutely any payments.
Here he is - this person.
At the time of the emergence of Pix, the five largest banks owned approximately 80% of the total assets and deposits (and in total there were almost 200 commercial banks in the country).
The Central Bank of Brazil has done everything to provide equal conditions for all participants and increase competition in the banking system. In addition, such a platform is another step towards moving away from cash to electronic payments.
BCB opened registration for the new service eleven days before the launch and obliged all financial institutions that had more than 500 thousand clients to implement Pix without fail. I highly recommend it to everyone else. Banks immediately began sending notifications to their users inviting them to register. Some even went a little overzealous and registered phone numbers and CPF (in our opinion - TIN) of some users automatically and without their permission, which is generally prohibited.
Well, on November 16, 2020, Pix began its official work.
After just eight months, it was handling up to forty million payments a day, most of which were personal transfers, and in October 2021, Bloomberg called the app ubiquitous in Brazil. By November 2021, more than six billion transactions totaling 3.75 trillion reais (that is, about 682 billion US dollars) had already been completed in the system, and by March 2022, more than 113 million people and 8.5 million companies had registered with Pix .
Gradually, with the help of Pix, it became possible to withdraw money from retail outlets and ATMs, plan payments and automatically calculate fines, discounts, interest on loans, etc.
Carlos Eduardo Brandt, Head of Management and Operations at Pix. Photographer: Rafael Ribeiro/BCB.
Transactions can happen in three main ways:
a) Using a QR code.
It can be static (you can find it printed out at the checkout counter of some Brazilian “Pyaterochka” or on the table of a micro-entrepreneur) and dynamic (this code is unique for each transaction and contains some additional information: it can be found, for example, on invoices for public utilities). From the point of view of the payer, however, it doesn’t matter what code is in front of him, because in both cases it needs to be scanned with a mobile phone and paid by pressing a couple of buttons.
b) Via NFC (Near Field Communication), that is, using technologies that allow the exchange of information through direct contact.
c) Using Pix Keys, that is, special keys.
They come in four types:
The key can be linked to any account in any Brazilian bank or to an account in payment systems (for example, iti itau or PicPay), which is convenient for those who have neither citizenship nor residence permit.
One company can register no more than twenty keys in the same bank, and one person can register no more than five (which, however, does not prevent him from registering five more in the second bank and five more in the third), one for each transaction account . Keys can be transferred from bank to bank if necessary.
There is no minimum limit for payments, but to protect against fraudsters, banks and payment platforms may set a maximum amount of transfers per day or per month from one person. The account owner can then independently adjust these limits.
There is no single standard for what the Pix function should look like inside a banking application. The BCB set the minimum requirements and left the rest to the banks, so the process for using this system varies slightly between applications, but this is not critical.
Firstly, instant transfers and payments, available 24/7, were a novelty for Brazilians.
That is, really instant: for money to be debited from one account and “fall” into another, it only takes ten seconds on any day of the week and at any time of the day or night. At the same time, no one is interested in which branch of which bank accounts are opened and what details someone has. You don’t need to enter any account information: the system will figure everything out on its own.
No cards, check slips, cash or ATM required. It is not even necessary to open a bank account; a digital account or simply access to the payment platform is enough. And no integration with other services on the smartphone.
Owners of small businesses especially loved this system, who previously were forced to open accounts in all possible banks so that their clients would not be charged a commission when paying for goods or services (and it could be quite significant - up to 30% of their cost).
Secondly, Pix is a universal and multifunctional thing. It can be used to send money from person to person, from person to business, from business to business, from person to government and from business to government. That is, in principle, you can do anything: pay taxes or utilities, pay off a debt to a friend, buy ice cream or a car. Pix’s work does not depend in any way on the transaction amount or its type.
Thirdly, for ordinary users it does not cost a single real, and companies pay a very small percentage. BCB is responsible for managing and operating all Pix operating systems, and there are far fewer intermediaries involved in the transfer process than with traditional payment methods.
Fourthly, Pix allows you to make transactions around the world from more than 200 countries and convert foreign currencies at a fairly favorable rate. There is even a special interface for trading cryptocurrency. There are no problems with hidden fees, lost profits due to bank fees or delays in payment processing.
Its services can be used by non-residents, offshore companies, foreign directors and shareholders, and B2BPay collects direct payments on behalf of suppliers transacting with European clients.
That is, when developing Pix, we tried to take into account everything possible, so the effect is “Wow!!!” for those who are accustomed to entering endless data, paying a commission, and then waiting several days until the transfer reaches the addressee, it was provided.
In Brazil, various bad guys from time to time use a method called “express kidnapping” to get money. They grab people, take them to an ATM and, threatening them with a knife or gun, force them to withdraw the maximum amount possible.
So, Pix, at first glance, can be used for exactly the same purposes - you don’t even need to take anyone anywhere, just (im)politely ask to transfer savings through the application right here and now. But in this case, it will be easy to identify the criminals, because all transactions are monitored, you cannot use accounts created in other people’s names, and not a single bank will allow you to register someone else’s CPF in your account.
Two-factor authentication provides additional protection. Moreover, the confirmation code can be sent to your registered phone or e-mail, and if CPF or a random set of letters was used as a key, then to the application.
The bank may delay a payment that seems suspicious for half an hour during the day and an hour at night, so that it can be canceled in time if something goes wrong. In addition, there are special mechanisms that will help the sender if he does run into scammers.
These are, for example, a warning lock and a special reset mechanism.
Moreover, all information about transactions, firstly, is encrypted, and secondly, is not on the public Internet, but on the National Financial System Network (RSFN), which is completely separate from it. And instead of the blockchain, encrypted messages with a digital signature are used for transactions.
All this allowed Pix to reduce the level of fraud by more than 90% compared to using bank cards and Boleto.
International fast payment systems from Google, Apple, Android, Samsung and WhatsApp also work in Brazil, of course. But they are all much less popular than Pix. Perhaps also because they are slowed down by BCB. For example, WhatsApp Pay, which started working six months earlier than Pix, was suspended within a week because doubts arose about its security. But even after the relaunch, only 7% of WhatsApp users in Brazil have registered their debit cards with the app . According to statistics, Google Pay is used by fewer people today than at the beginning of 2020, and the popularity of Apple Pay, although it has grown, is still losing to Pix. And so on.
By the way, in Mexico, a similar digital payment system Cobro Digital, or CoDi, languished in obscurity for a long time. It appeared a little earlier - in 2019, but in the first two years a significant part of the population did not know about its existence. In a country of 130 million people, only seven million — about 5% — have signed up for CoDi by 2021, and just 840,088 accounts have had at least one transaction, according to Banco de Mexico. Two years later, by 2023, there were already 18 million. Better, but still very little. And if monthly transactions reached $140 billion through Pix already in 2021, then a total of only 0.16 billion passed through CoDi in two years.
There are most likely several reasons for this. Firstly, in Brazil, unlike Mexico, they were accustomed to using electronic money long before Pix, it just made this process more convenient. In Mexico, cash reigns supreme, and half the population does not have a bank account at all.
And secondly, Pix is a completely open system. 774 firms have signed up to participate in this game, including banks, credit unions, fintech payment companies and government agencies. Among the accounts registered in CoDi, 90% were from three large banks.
However, water wears away stones, and the number of mobile payments in Mexico is slowly increasing. True, in a strange way. Currently, there are three products operating in the country , connected to each other: SPEI allows you to transfer money between accounts in different banks using a mobile phone (for this you need to know the recipient’s account), CoDi works with a system of QR and NFC codes and allows you to buy goods, and DiMo allows you to make and receive transfers using a mobile phone number without the need to know the person’s bank details.
Campos Neto says, “We haven’t even started yet and have only used 5% of Pix’s potential.”
So now BCB is figuring out how to make it possible to make payments without an Internet connection. And also - how to create an alternative to ATMs, as well as a system that would allow you to withdraw cash using Pix in retail stores. In short, these guys still have a lot of interesting ideas!
The speed with which Pix has taken the entire country by storm is impressive and shows how quickly fintech is changing our lives.
The challenges faced by fintech often do not have universal solutions. You need to take into account the starting point, context, specifics of the region and much more. Last time we talked about how mobile money transfers rocked the banking system in Kenya and what came of it.
And now for everyone who has read to the end, a musical break. Just look at how fiery Brazilian machos are also crazy about Pix!
Everyone has their own keys and QR codes for transfers - from serious organizations to those guys who stand at the station with a sign “Apply for a ticket home.”
Pix is actually used by almost all Brazilians. That’s exactly what it says on the service’s official website.
The developers managed to provide for almost everything that was possible: cut off most opportunities for Internet fraud, confidently outperform all existing international transfer systems such as Apple or Android Pay and win widespread love (if you read to the end, you will receive the most effective confirmation of this).
Now I’ll tell you how this Pix works.
Despite the fact that Pix appeared in the midst of a pandemic, it cannot be said that it was the reason for its emergence: the new service was announced in the summer of 2019, when there was no talk of any covid yet.
But the system, of course, came out on time: in 2020, the number of digital payments around the world increased many times over.
In Russia, SBP has similar functionality, which allows you to pay in stores and transfer money by phone number. And in the USA, the private service Zelle is very popular, with which you can pay in most online stores in America.
The coolest thing, of course, happened in Thailand. But in Brazil everything is also quite good, and largely thanks to the convenient Pix.
How things were before Pix
In general, of all the countries in Latin America, Brazil has the best conditions for the emergence of e-commerce. In remote villages and villages, of course, the Internet is often absent. But on the other hand, 87.5% of the population lives in cities , and out of 216 million residents of this country, 181.8 million people are connected to the network . Brazil ranks fifth in the world in terms of the number of mobile phones , and fourth in terms of the number of Internet users. In addition, according to GlobalWebIndex, Brazilians spend more time on social networks than residents of any other country in the Western Hemisphere.
At the same time, at the time of the appearance of Pix in Brazil, you could spend money in one of four ways:
- Pay with a bank card.
- Pay in cash (or send it to relatives in an envelope).
- Make a TED (Transferência Eletrônica Disponível) or DOC (Documento de Ordem de Crédito) translation. Not free, of course: the commission for any of them can be up to 11 reais, and doing it in a bank is a little more expensive than online. The difference between them is that with TED you can send any amount of money, and it will reach the recipient on the same day (if the transfer was made on weekdays and before 17:00), while DOC allows you to send no more than 5,000 reais, and they will “fall” into the recipient’s account only on the next business day (but only if you manage to send the transfer before 22:00). That is, you have the whole night to cancel the DOC if you suddenly realize that you have made a mistake.
- Use boleto. This system appeared in 1993 and was initially called Boleto Bancário, but then it was improved to Boleto Flash. The difference is that previously a lot of details were needed, the transfer took several days to be processed, and it could only be done in person, but now online payments are available, using a barcode and in just a few hours. Open source projects such as BoletoPHP allow merchandisers to create unregistered Boleto Bancário without interacting with a bank. Boleto are most similar to checkbook checks: they are payment receipts with unique numbers that can be generated by banks (or banking applications) in paper or electronic form. Anyone can print their own boleto. That is, in order to pay anywhere, you don’t have to tell third parties your credit card number, but simply give the “ticket”. You can cash out boleto either online or in person at bank branches, ATMs, lottery agencies and some supermarkets (in a word, literally at every turn). You can write off the entire amount at once, or you can write it off in parts. They are used to pay bills and buy goods and services. The main limitation is that boleto has an expiration date and can only be used freely until it expires. And after this point, you can take the check only to the branch of the issuing bank.
Boleto has two very big disadvantages:
- Due to delays in payment confirmation or minor errors, which are very easy to make when entering a huge pile of data, purchases are often cancelled.
- It turned out that the system was generally unsafe: boleto was hacked epically a couple of times: scammers used copies of existing and already owned checks to transfer money from client accounts straight into their pockets. A little hacking skills, a little social engineering - and voila: several billion dollars in your pocket!
Either way, in 2019, approximately 77% of retail transactions in Brazil were cash-based.
Same with Pix
“Society demands something fast, cheap, secure, transparent and open,” said Roberto Campos Neto, president of the Central Bank of Brazil (BCB), and announced the creation of an instant payment system called Pix.
By the way, Pix is not an acronym. The name begins with the first letters of the words “pagamentos instantâneos” (which means “instant payments”), and “x” is our favorite mathematical variable, which should symbolize the possibility of using the system for absolutely any payments.
Here he is - this person.
At the time of the emergence of Pix, the five largest banks owned approximately 80% of the total assets and deposits (and in total there were almost 200 commercial banks in the country).
The Central Bank of Brazil has done everything to provide equal conditions for all participants and increase competition in the banking system. In addition, such a platform is another step towards moving away from cash to electronic payments.
BCB opened registration for the new service eleven days before the launch and obliged all financial institutions that had more than 500 thousand clients to implement Pix without fail. I highly recommend it to everyone else. Banks immediately began sending notifications to their users inviting them to register. Some even went a little overzealous and registered phone numbers and CPF (in our opinion - TIN) of some users automatically and without their permission, which is generally prohibited.
Well, on November 16, 2020, Pix began its official work.
After just eight months, it was handling up to forty million payments a day, most of which were personal transfers, and in October 2021, Bloomberg called the app ubiquitous in Brazil. By November 2021, more than six billion transactions totaling 3.75 trillion reais (that is, about 682 billion US dollars) had already been completed in the system, and by March 2022, more than 113 million people and 8.5 million companies had registered with Pix .
Gradually, with the help of Pix, it became possible to withdraw money from retail outlets and ATMs, plan payments and automatically calculate fines, discounts, interest on loans, etc.
Carlos Eduardo Brandt, Head of Management and Operations at Pix. Photographer: Rafael Ribeiro/BCB.
How Pix works
Transactions can happen in three main ways:
a) Using a QR code.
It can be static (you can find it printed out at the checkout counter of some Brazilian “Pyaterochka” or on the table of a micro-entrepreneur) and dynamic (this code is unique for each transaction and contains some additional information: it can be found, for example, on invoices for public utilities). From the point of view of the payer, however, it doesn’t matter what code is in front of him, because in both cases it needs to be scanned with a mobile phone and paid by pressing a couple of buttons.
b) Via NFC (Near Field Communication), that is, using technologies that allow the exchange of information through direct contact.
c) Using Pix Keys, that is, special keys.
They come in four types:
- Number in the Register of Individuals or Legal Entities (CPF/CNPJ), that is, in our opinion, TIN.
- E-mail address.
- Cell phone number.
- A unique key generated by the system that looks like a set of random letters and numbers. That is, you don’t have to link your personal data to the transaction account information.
The key can be linked to any account in any Brazilian bank or to an account in payment systems (for example, iti itau or PicPay), which is convenient for those who have neither citizenship nor residence permit.
One company can register no more than twenty keys in the same bank, and one person can register no more than five (which, however, does not prevent him from registering five more in the second bank and five more in the third), one for each transaction account . Keys can be transferred from bank to bank if necessary.
There is no minimum limit for payments, but to protect against fraudsters, banks and payment platforms may set a maximum amount of transfers per day or per month from one person. The account owner can then independently adjust these limits.
There is no single standard for what the Pix function should look like inside a banking application. The BCB set the minimum requirements and left the rest to the banks, so the process for using this system varies slightly between applications, but this is not critical.
Why do people love Pix so much?
Firstly, instant transfers and payments, available 24/7, were a novelty for Brazilians.
That is, really instant: for money to be debited from one account and “fall” into another, it only takes ten seconds on any day of the week and at any time of the day or night. At the same time, no one is interested in which branch of which bank accounts are opened and what details someone has. You don’t need to enter any account information: the system will figure everything out on its own.
No cards, check slips, cash or ATM required. It is not even necessary to open a bank account; a digital account or simply access to the payment platform is enough. And no integration with other services on the smartphone.
Owners of small businesses especially loved this system, who previously were forced to open accounts in all possible banks so that their clients would not be charged a commission when paying for goods or services (and it could be quite significant - up to 30% of their cost).
Secondly, Pix is a universal and multifunctional thing. It can be used to send money from person to person, from person to business, from business to business, from person to government and from business to government. That is, in principle, you can do anything: pay taxes or utilities, pay off a debt to a friend, buy ice cream or a car. Pix’s work does not depend in any way on the transaction amount or its type.
Thirdly, for ordinary users it does not cost a single real, and companies pay a very small percentage. BCB is responsible for managing and operating all Pix operating systems, and there are far fewer intermediaries involved in the transfer process than with traditional payment methods.
Fourthly, Pix allows you to make transactions around the world from more than 200 countries and convert foreign currencies at a fairly favorable rate. There is even a special interface for trading cryptocurrency. There are no problems with hidden fees, lost profits due to bank fees or delays in payment processing.
Its services can be used by non-residents, offshore companies, foreign directors and shareholders, and B2BPay collects direct payments on behalf of suppliers transacting with European clients.
That is, when developing Pix, we tried to take into account everything possible, so the effect is “Wow!!!” for those who are accustomed to entering endless data, paying a commission, and then waiting several days until the transfer reaches the addressee, it was provided.
And by the way, about safety
In Brazil, various bad guys from time to time use a method called “express kidnapping” to get money. They grab people, take them to an ATM and, threatening them with a knife or gun, force them to withdraw the maximum amount possible.
So, Pix, at first glance, can be used for exactly the same purposes - you don’t even need to take anyone anywhere, just (im)politely ask to transfer savings through the application right here and now. But in this case, it will be easy to identify the criminals, because all transactions are monitored, you cannot use accounts created in other people’s names, and not a single bank will allow you to register someone else’s CPF in your account.
Two-factor authentication provides additional protection. Moreover, the confirmation code can be sent to your registered phone or e-mail, and if CPF or a random set of letters was used as a key, then to the application.
The bank may delay a payment that seems suspicious for half an hour during the day and an hour at night, so that it can be canceled in time if something goes wrong. In addition, there are special mechanisms that will help the sender if he does run into scammers.
These are, for example, a warning lock and a special reset mechanism.
Moreover, all information about transactions, firstly, is encrypted, and secondly, is not on the public Internet, but on the National Financial System Network (RSFN), which is completely separate from it. And instead of the blockchain, encrypted messages with a digital signature are used for transactions.
All this allowed Pix to reduce the level of fraud by more than 90% compared to using bank cards and Boleto.
Pix competitors
International fast payment systems from Google, Apple, Android, Samsung and WhatsApp also work in Brazil, of course. But they are all much less popular than Pix. Perhaps also because they are slowed down by BCB. For example, WhatsApp Pay, which started working six months earlier than Pix, was suspended within a week because doubts arose about its security. But even after the relaunch, only 7% of WhatsApp users in Brazil have registered their debit cards with the app . According to statistics, Google Pay is used by fewer people today than at the beginning of 2020, and the popularity of Apple Pay, although it has grown, is still losing to Pix. And so on.
Why isn't it like this in Mexico?
By the way, in Mexico, a similar digital payment system Cobro Digital, or CoDi, languished in obscurity for a long time. It appeared a little earlier - in 2019, but in the first two years a significant part of the population did not know about its existence. In a country of 130 million people, only seven million — about 5% — have signed up for CoDi by 2021, and just 840,088 accounts have had at least one transaction, according to Banco de Mexico. Two years later, by 2023, there were already 18 million. Better, but still very little. And if monthly transactions reached $140 billion through Pix already in 2021, then a total of only 0.16 billion passed through CoDi in two years.
There are most likely several reasons for this. Firstly, in Brazil, unlike Mexico, they were accustomed to using electronic money long before Pix, it just made this process more convenient. In Mexico, cash reigns supreme, and half the population does not have a bank account at all.
And secondly, Pix is a completely open system. 774 firms have signed up to participate in this game, including banks, credit unions, fintech payment companies and government agencies. Among the accounts registered in CoDi, 90% were from three large banks.
However, water wears away stones, and the number of mobile payments in Mexico is slowly increasing. True, in a strange way. Currently, there are three products operating in the country , connected to each other: SPEI allows you to transfer money between accounts in different banks using a mobile phone (for this you need to know the recipient’s account), CoDi works with a system of QR and NFC codes and allows you to buy goods, and DiMo allows you to make and receive transfers using a mobile phone number without the need to know the person’s bank details.
Further prospects for the development of Pix
Campos Neto says, “We haven’t even started yet and have only used 5% of Pix’s potential.”
So now BCB is figuring out how to make it possible to make payments without an Internet connection. And also - how to create an alternative to ATMs, as well as a system that would allow you to withdraw cash using Pix in retail stores. In short, these guys still have a lot of interesting ideas!
The speed with which Pix has taken the entire country by storm is impressive and shows how quickly fintech is changing our lives.
The challenges faced by fintech often do not have universal solutions. You need to take into account the starting point, context, specifics of the region and much more. Last time we talked about how mobile money transfers rocked the banking system in Kenya and what came of it.
And now for everyone who has read to the end, a musical break. Just look at how fiery Brazilian machos are also crazy about Pix!
