Brazil’s population is 213 million but over 30 million people are unbanked, i.e., do not have or use a bank account. Until a few years ago, competition among banks in Brazil was mild, with very few of them serving the vast majority of Brazilians. However, this situation is changing due to the greater presence of fintechs, which have brought innovation to diverse services that earlier were restricted to banks.
When we talk of payments, fintechs contribute tremendously to financial inclusion by offering prepaid accounts, credit products, digital wallets, to name a few. One of the biggest milestones in the sector was the launch of Pix, an instant payment method, which decisively democratised access to financial services and has been growing exponentially in ecommerce. In only two years, it has already surpassed the boleto (bank slip) as a payment method. Another interesting trend to watch is WhatsApp Pay, a payment initiator authorised by the Central Bank of Brazil and linked to Pix technology. Note that Brazil is WhatsApp’s second largest market after India, present in 99% of Brazilian smartphones.
In the cross-border segment, the credit cards scenario is critical, with only around 10% of Brazilians having access to a credit card activated for international purchases. This makes access to local payments methods key to the success of a cross-border business. Hence, connecting to a payment provider that offers all the payment methods preferred by Brazilians is paramount to reaching 100% of this huge market.
Before the arrival of digital payment methods in Brazil, the possibility of instalment purchases was linked only to credit cards, which most Brazilians do not have access to due to the issue of banking inclusion and costs or lack of access to credit. The main payment methods used by unbanked people are the boleto and, more recently, Pix, neither of which require a traditional bank account. A few months ago, however, Pix finally satisfied a demand of the Brazilian population and enabled instalment payments, connecting fintech accounts (prepaid) and the traditional accounts of banks – thus promoting financial inclusion.
Nubank, a Brazilian unicorn, implemented a new digital payment method called NuPay, whereby its clients can make debit payments or pay their purchases in up to 24 interest-free instalments, directly through the secure environment in the Nubank app, without having to provide their bank details or contract any service, which enables instant approval of purchases. On the other hand, for merchants, the biggest benefit is increased sales, thanks to better customer experience, higher approval rates, and an increase in the purchasing power of consumers. Other advantages include the simplification of operational processes and lesser working capital needs, thanks to next-day settlements, as well as the elimination of costs with intermediaries, antifraud tools, and chargebacks.
Since its implementation, Pix has registered surprising numbers and has established itself as the principal alternative payment method in Brazil. Nine out of ten bank transfers are made via Pix, thanks to its agility, exemption of fees for individuals, and availability, among others. Recently, Pix set a daily record of 73.2 million transactions and has been gaining ground in ecommerce transactions, a niche dominated by credit cards, having already overtaken the boleto.
Pix’s strong impact in such a short span of time indicates a future where this payment method, together with other digital ones, will dominate the segment, completely redefining the payments ecosystem. Currently, the implementation of international Pix is being studied, but cross-border businesses are likely to have access to it. A few payment providers like Bexs Pay offer a cross-border payment method for payin and payout transactions integrated to Pix, making transactions faster. Lower cost, 24x7 availability, and over 136 million consumers that Pix has won over only serve to reinforce the transformative role of this method in the cross-border ecosystem.
Brazilian institutions have been implementing measures to simplify and update some standards, besides improving transactions, costs, user experience, and other factors that help drive market competition. Pix was one of the most successful examples – and now, as its international application is being studied, joining hands with Nexus is one of the possible avenues. Nexus, which has been arousing a lot of curiosity among people, is an alternative to instant international transfers, being developed by the Bank for International Settlements (BIS). Its main goal is to connect international instant payment systems developed by several countries. The Brazilian project has no launch date yet, and there is no concrete information about its functioning for companies and consumers, or fees and taxes. However, considering the example of Pix for companies in Brazil, Nexus will most probably reduce costs for international transfers and payments, while offering greater agility and availability.
The Central Bank of Brazil is modernising foreign exchange regulations as well. In late December 2021, Federal Law 14,386, which came to be known as the ‘New legal framework for the foreign exchange market’, revoked and amended more than 30 rules, many of them dating back to the 1940s, 1950s, and 1960s. The new features brought by the law include the interoperability of (prepaid) payment accounts in the exchange market and fewer regulatory requirements for low-value transactions, among others. The regulation also introduced eFX, a legal figure that replaces international payment facilitators in intermediating payments for goods and services that involve one overseas party.
We believe all these measures will further drive cross-border ecommerce, which grew 60% in 2021 in Brazil alone, as well as other businesses involving transactions in different currencies.
This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2022–2023, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
With over 25 years leading Brazilian financial institutions, Didier’s expertise includes innovation in payment processing and Brazilian FX regulation. At Bexs Banco, his main challenge is to bring innovation to facilitate, through cross-border transactions, access to global goods and services for Brazilians and the best of Brazil for the world.
Bexs connects Brazil to the world with the best team and innovative FX and payment technologies to bridge the gap between companies and customers on every continent. The group unifies the solutions developed by Bexs Bank, which has been providing tailored transactions and API capabilities to the FOREX market for over 30 years, and Bexs Pay, a pioneering digital payment provider for cross-border markets.
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