PIX Instant Payments System

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PIX is Brazil's instant payment system, launched in November 2020 by the Central Bank of Brazil (BCB).
What are the main aims and objectives?

The PIX instant payments system in Brazil was launched with several key objectives in mind. Primarily, it aimed to reduce reliance on cash transactions and promote widespread digitalization of the country's payment sector. The Central Bank of Brazil (BCB) sought to foster competition in the financial industry, increase efficiency in payment processes, and enhance financial inclusion by bringing more Brazilians into the formal financial system. PIX was designed to offer a fast, convenient, and low-cost alternative to existing payment methods, benefiting both individuals and businesses. By introducing PIX, the BCB aimed to act as a catalyst for change in the retail payments landscape, oversee the safety and efficiency of the solution, and set standards to promote competitiveness and broad usage across the country.

How does the program work?

PIX, Brazil's instant payment system, operates through a centralized messaging and settlement framework called the Instant Payment System (SPI), managed by the Central Bank of Brazil (BCB). The system enables real-time transfers and payments between individuals, businesses, and government entities, available 24/7, including weekends and holidays.

To use PIX, users must register one or more PIX keys, which serve as unique identifiers for their accounts. These keys can be a taxpayer registry code (CPF/CNPJ), email address, mobile phone number, or a randomly generated unique user ID (UUID)34. Users can register up to five keys per account for individuals and up to 20 keys for businesses.

When initiating a transaction, the payer simply needs to enter the recipient's PIX key or scan a QR code. The system then verifies the transaction details, ensuring compliance with regulations and sufficient funds, before instantly transferring the money from the payer's account to the recipient's account5. This process typically takes less than 10 seconds, with an average completion time of just 2.5 seconds.

PIX transactions can be initiated through various channels, including mobile banking apps, internet banking platforms, and even without a traditional bank account by using digital wallets or other participating financial institutions. The system supports a wide range of transaction types, including person-to-person (P2P), person-to-business (P2B), business-to-business (B2B), and government-related payments.

The PIX ecosystem consists of two main components: the SPI for settlement and the Transaction Accounts Identifier Directory (DICT) for managing the PIX keys database7. This infrastructure allows for both direct and indirect participation by financial institutions and payment service providers, ensuring broad accessibility and interoperability across the Brazilian financial system.

What is the overall cost?

The initial implementation costs for PIX up to 2021 amounted to R$13.6 million (approximately $2.7 million USD). For 2024, the forecasted costs are R$25.3 million (about $5 million USD) for maintenance and R$43.1 million (about $8.6 million USD) for investment.

How was it implemented?

The creation of PIX, Brazil's instant payment system, was a strategic initiative led by the Central Bank of Brazil (BCB) to modernize the country's financial landscape and promote digital payments. The project began at the end of 2016 when the BCB published a report outlining the concept. In May 2018, the BCB initiated market discussions that would eventually lead to PIX's development.

The BCB took a proactive approach in designing PIX, analyzing market scenarios, generating analysis reports, and identifying potential paths for the future. Unlike some other countries where instant payment systems were developed by private entities, the BCB decided to play multiple roles in PIX's creation. It acted as the regulator, overseer, and operator of the system, ensuring a comprehensive and cohesive development process.

The development of PIX was remarkably efficient, taking less than two years from conception to launch. The BCB worked collaboratively with financial institutions, fintech companies, and other stakeholders to build a robust infrastructure. This included creating the Sistema de Pagamentos Instantaneos (SPI) for settlement and the Diretório de Identificadores de Contas Transacionais (DICT) for managing the PIX keys database.

What impact has been measured?

The IMF published a paper in July 2023 discussing the key design features of PIX that contributed to its success. The report highlighted:

  • PIX's rapid adoption, with over 140 million individuals (about 80% of adult population) and 13 million firms using the system by May 2023.
  • The system's support for financial inclusion, facilitating transactions for 71.5 million individuals who had not made electronic credit transfers before PIX's launch.
  • PIX's transaction speed, settling in 3 seconds on average compared to 2 days for debit cards and 28 days for credit cards

Payment Landscape Transformation

  • PIX has become the dominant payment method in Brazil, surpassing both cash and card transactions in volume.
  • In 2023, PIX accounted for 35% of all transactions, compared to 23% for credit cards and 16% for debit cards.
  • Use of PIX surged 74% in 2023 to nearly 42 billion payments across the Brazilian economy.

Economic Efficiency

  • PIX generated cost savings of $5.7 billion in 2021 alone and is expected to help generate 2% of Brazil's GDP by 2026.
What lessons can be learned?

Several key lessons can be learned from Brazil's PIX instant payment system:

Design and Implementation

  1. Careful planning: The Brazilian authorities designed PIX after thorough study of instant payment systems in other countries, selecting features that would work best in their context.
  2. Comprehensive approach: The Central Bank of Brazil (BCB) acted as the owner, operator, regulator, and supervisor of PIX, ensuring a cohesive development process.
  3. Standardization: A standardized user interface and experience across providers made it easy for users to adopt and switch between services.
  4. Mandatory participation: Requiring large banks to participate helped overcome interoperability challenges and develop an effective network from the start.

Features Contributing to Success

  1. Speed and cost: PIX transactions settle in an average of 3 seconds and are free for individuals, with low costs for businesses.
  2. Flexibility: The system allows for various transaction types and has no centrally imposed transaction limits, providing flexibility for different user needs.
  3. Accessibility: Multiple alias options (phone numbers, email addresses, tax IDs) make the system easy to use.
  4. Security focus: Mechanisms for user identification, KYC compliance, and fraud prevention were implemented from the beginning.

Regulatory Approach

  1. Inclusive regulation: The BCB extended regulatory oversight to non-bank participants, ensuring a level playing field and maintaining system integrity.
  2. Adaptive regulation: The authorities addressed emerging issues, such as adjusting capital requirements for different types of financial conglomerates.
  3. Risk-based supervision: The BCB implemented proportional risk-based supervision and real-time monitoring technologies to manage the high volume of transactions.

Ongoing Development

  1. Continuous improvement: The authorities are developing new features like recurrent payments and international transfers, showing the importance of evolving the system.
  2. Addressing challenges: Ongoing efforts to improve liquidity management, enhance security, and mitigate AML/CFT risks demonstrate the need for constant vigilance and adaptation.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom