The Brazilian Central Bank has a mission. They want to remove barriers to financial inclusion for citizens, and democratize the financial infrastructure of Brazil. This mission is coming to a head in PIX, a system for instant transfers and payments, which will be made mandatory for the largest financial institutions in the country and the sole responsibility of the Central Bank itself.
PIX will be made available to the Brazilian market this November although it may take a while before it is integrated in all financial institutions. It is likely to offer a sizeable (but positive) upheaval to the Brazilian e-commerce market. We look at what it means for customers and merchants, how it differs from current payment options, and how you can use it.
So what is PIX?
In short, PIX is a form of instant money transfer or payment, available 24/7. According to the Central Bank, PIX allows users to make a direct transfer from their account, to another’s without the need for intermediaries. Because the process is automated, and does not need a middle-man PIX has a number of features which make it unique:
- Simplicity – You can identify the person receiving funds by either: Filling out their PIX key, which is a nickname/token used to identify their account; or scanning a QR code.
- Availability – Payments can be made 24 hours a day, 7 days a week on any day of the year (including weekends and holidays).
- Speed – Funds are transferred to recipients in a few seconds
- Convenience – A payment can be completed by a user in a few short steps.
- Multiple usage – PIX can be used for transfers, person to person payments, person to business payments, business to business payments, bill payments, billing and government collection.
- Interoperability – Payments can be made through PIX even if the person or company receiving funds operates with a different financial institution.
Why did the Brazilian Central Bank develop PIX?
Prior to PIX, payments in Brazil were either electronic, or made in cash. Electronic payments (TEDs and DOCs – bank transfers between different financial institutions) can take days and cost an exorbitant amount. Up to 20 Reals per transaction for some TEDs.
Boletos, or cash payments, are the second most popular payment method for online purchases. Particularly in a country with such a large unbanked population (a little less than a third still have no access to financial services). However, carrying cash around is never the safest option. Additionally the customer must wait until store opening times to be able to pay for the item itself.
PIX is designed to be faster and easier. It reduces the waiting time for transfer of funds for both payer and payee. Better yet, it takes advantage of the growing phenomenon of mobile e-commerce (44% of 2019 e-commerce transactions were made via a mobile phone).
Who can use PIX?
Importantly, PIX can be used by any private citizen with a bank account. Because the scheme is created by the Brazilian Central Bank, it is not affiliated with any particular financial acquirer or institution. To begin paying with PIX a user will need to register an account to generate a key. This key will be the user’s account identifier. It is possible to pay without a key, but it will require the user to manually fill in all of your details.
For legal entities, the government will require financial institutions with over 500,000 users to offer PIX as a standard payment method. Other legal entities can either apply to use PIX, again by registering for a key.
Alternatively, merchants who are either international, or relatively small, can offer PIX as a payment method in their webshop by partnering with a payment aggregator like BoaCompra. Because of the huge convenience PIX offers (to both merchants and consumers) BoaCompra will shortly be allowing all customers operating in Brazil to offer PIX on their webshop.
So how does it work?
PIX will allow users to pay in three different ways:
- Manually filling in account details – Having selected the PIX payment method, users can manually fill in the account details of the person that will receive the payment. This is similar to the way you would complete a TED or DOC
- Using a PIX key – PIX keys identify a specific user and are linked to a single bank account. The PIX key is filled in in order to complete the transaction
- Using a QR code – simply scan the QR code, to complete the payment. The QR code can contain the amount that must be paid (dynamic) or require the user to also fill in how much they will be paying (static)
For international merchants (particularly those in Europe or Asia), paying for goods using a QR code will already be familiar.
When scanned this will allow the customer to simply pay for the item with their own PIX linked account instantly. All the necessary payment data (merchant’s bank account details, sum to be paid etc) will already be contained in the QR code.
BoaCompra will be ensuring that PIX is shortly available to add to your webshop checkout process. By offering this innovative payment method our customers can increase conversion rates at the checkout.
Want to read more about PIX? Stay tuned for our other blogs diving into the key benefits of PIX for consumers and merchants; and how (and why) to generate your PIX key.