Consider those who gain from the Bolsa Familia programme in Brazil, which aids those living in poverty. Of these individuals, only 35% had bank accounts in 2016. These days, that figure is more like 90%, or more than 160 million Brazilians. The majority of this can be attributed to the relatively recent introduction of the “Pix Instant Payment System” in 2020. This quick payment system allows users to transfer money in real-time via a mobile phone interface. This system has accelerated Brazilian commerce and quickly matured the country’s digital payment market.

Not surprisingly, PYMNTS recently ranked Brazil as one of the world’s most digitally connected nations, outperforming the United States, United Kingdom, and Germany. It has cleverly promoted a financial inclusion philosophy and worked tirelessly to give everyone a share in Brazil’s rapidly growing economy.

A booming digital payment landscape

In October 2024, news surfaced about Brazil-based digital bank PicPay offering access to the Pix instant payment system via WhatsApp, as the financial services venture made the best use of its partnerships with Meta and Microsoft. Unlike traditional chatbot assistants, PicPay’s GenAI, developed in-house and powered by Microsoft Azure OpenAI Service, will instantly recognise Pix keys in many contexts, such as complex conversations, audio messages, or even photos and screenshots containing multiple pieces of information.

As per Carlos Netto, CEO of Brazilian fintech Matera, there were more than 5.5 billion Pix transactions just in September 2024, a 41% increase, by the company’s estimates, over 2023. Things have been further boosted by the Southern American country’s central bank’s creation of payment institutions, which managed accounts and payment services, leading to inexpensive accounts connected to instant payment rails.

Another prominent Brazilian online payment service provider, PagBrasil, which handles Brazilian transactions for international businesses, has launched two new solutions to expand the reach of Pix beyond national borders, by partnering with fintechs like B89 and Wipay.

International Pix and Pix Roaming will enable Brazilian tourists to use Pix abroad whilst allowing foreign visitors to utilise the payment system within Brazil. The solutions aim to reduce transaction fees for merchants and eliminate the standard 30-day wait period associated with credit card payments.

Pix, which enables real-time bank-to-bank transfers through mobile applications and digital wallets, has reached 151 million active users, representing 92% of Brazil’s adult population. The system processed 227.4 million transactions in one day in September 2024, moving R$108.4 billion (approximately $18.5 billion).

PagBrasil has partnered with Peruvian B89 to offer International Pix to merchants across Panama, Colombia, Peru and Bolivia. The partnership also enables Brazilian citizens to pay in reais with a fixed exchange rate at purchase. The tie-up with Spanish payments technology provider Wipay has ensured that Pix will be available to Europe-based merchants on a much wider scale. The system will operate in Spain, Portugal and the Netherlands, with plans to expand to broader US and European markets.

How Pix overhauled Brazil’s payment systems

Historically, the high costs associated with credit card and bank transfers have been one of the biggest obstacles to financial inclusion. This issue was essentially resolved in Brazil with the launch of Pix, which charges an average of just 22 basis points to merchants and allows peer-to-peer payments at no cost.

According to data from the Central Bank of Brazil, credit has become a major issue in Brazil. The yearly interest rate for revolving credit card lines is 431.6% or 14.9% per month. However, the Brazilian government is taking steps to cap interest rates on revolving credit card lines. This has an impact on customers and merchants, who must pay the acquirer’s margin and other associated costs.

While over 40 million more people have become bank customers in Brazil in the last two years alone, at the same time, 50 million Brazilians are thought to have made their first digital payment. Currently, four out of five Brazilians have paid with or received money using Pix, and its usage has quickly overtaken that of credit and debit cards. This is impressive considering the historically sluggish global adoption of government initiatives. The way a nation views financial transactions is completely changing, and we are seeing this in real-time.

“Consumers in Brazil are also exploring how these wallets can be trusted for non-transactional purposes. In fact, they are doing so at a much higher rate than their peers in other countries. For example, 34% of consumers in Brazil expect to verify their identity using a digital wallet in the next three years. This suggests that the Brazilian market is ready to use these wallets to hold IDs and other documents,” reported PYMNTS in September 2024.

Pix is now seen surpassing credit cards as the leader in the local online purchase market as soon as 2025, earlier than initially expected, a new study from Brazilian payments firm Ebanx showed.

The study, based on data from research and intelligence firm PCMI, showed Pix is expected to account for 44% of Brazil’s online payment market by the end of 2025, while credit cards were seen with a 41% slice. A previous version of the study released earlier in 2024 had projected Pix to nearly match credit cards in the local online market only by the end of 2026.

Investigating reasons behind Pix’s success

The product designed by Brazil’s central bank has become a boon to online retailers, helping with cash flow in a sector with tight margins, while undercutting the legacy business of banks and fintechs built on existing credit card infrastructure.

The use of Pix surged 74% in 2023 to nearly 42 billion payments across the Brazilian economy, surpassing credit and debit card charges combined by about 23%, according to central bank data and industry group Abecs.

For buyers, the switch to Pix has been nearly seamless, as all they need to do is scan a QR code with any banking app instead of reaching for their wallet. For sellers, the innovation has turned the tables on the traditionally lucrative card payments industry. In online retail, orders paid with Pix surged 22% points in two years to about a third of all purchases in December 2023, according to e-commerce research firm Neotrust. Credit card orders slipped 5% points to 51% in the period.

Amid some of the possible changes teased by Brazil’s central bank, we have things like recurring payments and purchases in instalments. One government official told Reuters in April 2024 that these features would likely boost Pix Payment’s role in retail.

How is Pix putting pressure on the payment card players? Paying with a debit or credit card requires sellers to pay discount fees divided between card networks such as Visa, Mastercard and American Express, along with payment processors such as Cielo, Rede, Stone, Getnet and PagBank, as well as card issuers, which are typically banks. By removing these intermediaries, Pix ensures that users receive no cut of such transactions, and payment processors, which pocket a much smaller slice than they get for credit or debit card purchases.

The credit card industry players are now feeling the heat from the Pix and shifting their approach. Cielo’s controlling shareholders Banco do Brasil and Bradesco announced in February 2024 their plans to take it private, a path already taken in 2022 by rival Getnet, owned by Spanish bank Santander.

According to Reuters, “Going private gives leeway to offer a bundle of integrated products, becoming less reliant on the traditional business of connecting retailers to credit cards.”

“Pix has been and will continue to be the most disruptive technology in the financial segment in the country for the next few years,” said Eduardo Lopes, public policy director at Nubank, Latin America’s largest digital bank.

Nubank launched in Brazil a decade ago, offering one product: an iconic purple credit card without fees, but it has now diversified into a range of other segments, including an embrace of Pix seen at several leading banks and fintechs. The lender ended Q3 2023 with 13.6 million customers using Pix on credit, which lets users borrow for Pix transfers up to their Nubank credit card limit. Customers using it grew 166% from a year before.

A bright future ahead

Brazil is not the only nation that has experienced success with Pix-like technology. The world’s advanced economies have recently made comparable efforts, and emerging markets and developing economies (EMDEs) are also making significant progress in this area. Pix is undoubtedly setting the standard, though, and other nations would be well advised to pay attention.

A range of payment apps from PayPal to Venmo have sprung up globally, but none carry the weight of a central bank owning, operating and regulating the system (like Pix) to guarantee speed, efficiency and universal integration with banks from day one. The success of Pix in Brazil, which moved more than 17 trillion reais ($3.4 trillion) in 2023, has quickly expanded into payments between people and businesses (P2B).

“Pix is definitely a game-changer,” said Carlos Mauad, CEO of Fintech Magalu, the financial arm of retail group Magalu, which processes its own Pix transfers to cut costs and offer discounts to customers choosing the payment method.

According to Mayara Yano, senior advisor to the Pix management and operations department at the central bank, the central bank is preparing to roll out new features to boost the appeal of Pix for P2B use.

The first one, Pix Automatico, allows for automatically paying recurring bills. It can replace the current practice of bank invoices used for tuition, utilities and phone bills, and may also supplant credit cards used for media subscriptions and online services.

Another feature called Pix Garantido will allow its users to execute payments in monthly instalments, a major perk of credit cards for Brazilian consumers.

Matera CEO Carlos Netto, a tech firm helping companies integrate with the new payment platform, said that these changes may further accelerate the rise of Pix, which is now dictating the payment landscape in Brazil.

The post Brazil’s Pix transforms digital payments appeared first on International Finance.

Previously, he was a Director at AFEX for 10 years, one of the world’s largest FX providers. There he led the East Coast region, doubling revenues annually. His team specialised in corporate, institutional and HNW clients across industries like alternatives.

Under Ashley’s leadership, Deaglo aims to transform the cross-border transaction experience through AI and machine learning.

In his interview with the International Finance Magazine, Deaglo CEO Ashley Groves delves into a myriad of topics, offering profound insights on sustainable and ESG investments, the transformative impact of technology-driven platforms, the dynamics of cross-border investments, the untapped potential of emerging markets, and much more.

Q) How do you perceive the impact of the global awareness and demand for ethical investment practices on the future of the investment industry, particularly with the pivot towards sustainable and ESG investments?

A) Ethical investing is crucial for the industry’s future. Investors increasingly demand principles-based allocation. This motivates asset managers to integrate ESG factors. Sustainable investing will likely be the norm rather than niche and I believe that breaking out ESG to focus on each component individually would result in more optimal outcomes

Q) With the establishment of a $100 million VC fund for sustainable fashion by Hugo Boss, how do you see such initiatives shaping the investment landscape in the coming years, and what role can corporate entities play in driving sustainable investments?

A) Corporate sustainability funds pioneer positive change. This move by Hugo Boss exemplifies the power that private capital has to transform entire supply chains. As stakeholders pressure the more unethical brands who have been profiting most, and therefore see corporations as the primary catalysts for ethical production through investment vehicles like these.

Q) The past year witnessed a decline in cross-border investments due to global tensions. How do you anticipate geopolitical factors influencing the investment landscape in 2024, and what strategies can investors employ to navigate these challenges?

A) Geopolitical uncertainty persists, although tentative easing has buoyed sentiment. Pragmatic exposure adjustment, selective hedging, and risk-balancing strategies can buffer volatility. But for long-term investors, momentary tensions seldom impair a thesis. I remain bullish on cross-border capital flows.

Q) The trend towards technology-driven investment platforms is expected to continue. In what ways do you think these platforms will reshape the investor experience, and what potential risks or concerns should investors be mindful of in adopting such technologies?

A) Technology platforms enhance transparency, access, and reporting – democratising investing. We are betting on a shift towards AI-powered investment platforms that will profoundly reshape user experiences. Users will have the ability to get the insights they need and ensure they are valuable.

As algorithms provide advice and execute trades, ensuring unbiased high-quality data flows is crucial. There will be premiums associated with guarantors who audit and validate the purity of data used in financial models. Similarly, certifying training protocols will ensure recommendation engines align with fiduciary responsibilities.

Users should scrutinise these safeguards rather than solely seeking frictionless experiences. Otherwise, this new AI-driven era risks compromising oversight and accountability if not developed deliberately with principled machine learning approaches.

Q) Brazil has continued to attract investor interest. From your perspective, what factors contribute to Brazil’s appeal, and do you foresee any specific challenges or opportunities for investors considering the Brazilian market in 2024?

A) Brazil boasts attractive fundamentals – consumer growth, commodities, and energy innovation. They are also a young, humble and highly educated population that is consistently online and quick to embrace new technology. PIX banking and Nubank have become the new standard in digital banking.

The currency has also performed well against the USD and remained relatively stable. Interest rates also seem to be flattening out and for the first time, hedging costs will not be a limiting factor to investors.

I still see a distinct lack of quality service providers supporting the local businesses and investment managers.

Q) Other countries like Colombia, Chile, and India are expected to attract Foreign Direct Investment (FDI) due to improvements in their startup environment and banking infrastructure. How can investors identify and capitalise on emerging opportunities in these regions, and what due diligence measures are crucial in evaluating such markets?

A) Emerging markets offer tremendous upside. We implore Investors to stress test growth assumptions via scenario analysis. Examining financial inclusion trends, banking stability and tech ecosystem vitality in my opinion reveals standouts. But anti-bribery, IP, and FX protections also require a lot of additional due diligence.

Q) Given the historical volatility of crypto and digital assets, how do you assess the renewed interest in these areas within the investment industry, and what precautions or strategies do you recommend for investors navigating the crypto space in 2024?

A) Crypto retains immense potential on a risk/reward basis. I have always been a huge fan of blockchain and smart contract technology and I see multiple use cases within Deaglo such as multi-currency tokens for cross-border escrow. But sudden liquidity evaporation remains a key vulnerability in strained markets. Portfolio safeguards like exposure ceilings, hedge overlays, and managed drawdowns help temper this asset class’s risk but I believe that until Central banks adopt their own digital currencies and allow holders to move freely between tokens and cash we will be at risk of more boom or bust cycles.

Q) As the CEO and founder of Deaglo, what key takeaways from 2023 do you find most significant for investors, and how can these insights be applied to make informed investment decisions in 2024?

A) The year 2023 proved the resilience of innovation and global collaboration despite mounting uncertainties. For investors, embracing diversification and focusing on tangible income streams/adoptions create an all-weather portfolio to compound gains. Our goal is to follow FDI (Foreign Direct Investment) and we believe that there are a number of emerging markets that are poised for incredible growth. We want to make sure that we are there to allow investors to invest and divest as safely as possible.

Q) With the shift towards personalised and efficient investment solutions through technology-driven platforms, how can traditional investment firms adapt to stay competitive, and what role do you see for collaboration between traditional and tech-driven players in the industry?

A) Platformization is inexorable – those who harness it first will lead markets. Incumbents are already starting to strategically integrate digital capabilities through partnerships with nimble innovative technology firms. Combining institutional and regulatory expertise, a large client base with software scalability and analytics will ultimately create superior user experiences and more profitable businesses.

Q) Looking ahead to 2024, what advice would you give to individual investors and institutional players to thrive in the evolving global investment landscape, considering the anticipated shifts towards sustainability, technology-driven platforms, and emerging markets?

A) As we approach 2024, my advice for both individual investors and institutional players navigating the evolving global investment landscape is multifaceted. To thrive in the face of anticipated shifts towards sustainability, technology-driven platforms, and emerging markets, it is crucial to construct globally diversified portfolios grounded in solid principles. Prioritising risk-balancing is essential to mitigate volatility, and staying informed about policy impacts and megatrends ensures a proactive response to changing dynamics. Adaptability is key, particularly when venturing into new markets or regions, allowing for flexibility and responsiveness. Moreover, the swift but cautious adoption and embrace of new technologies will enhance efficiency and competitiveness while maintaining a focus on safety.

The post Emerging markets offer tremendous upside: Deaglo CEO Ashley Groves appeared first on International Finance.

In a press release, Nubank said, “The acquisition will allow us to offer even more payment solutions for electronic retail. Today, Spin Pay works in partnership with more than 220 retailers from different sectors, such as department stores, electronics and airlines, enabling the replacement of bureaucratic payment methods with simple, fast and secure experiences.

“The solution is available on the e-commerce platforms VTEX, Loja Integrada and soon on Shopify Plus, in addition to a solution (APIs) capable of integrating with any type of retail system.”

Recently, it was also reported that Nubank added support for Apple Pay to its debit and credit cards, with Purple, Ultraviolet, and PJ accounts all supported. This means Nubank’s customers can now make payments using Apple devices for the first time.

Last month, it was reported that Nubank was seeking a valuation of over $55.4 billion ahead of its planned US initial public offering. In its previous funding round, Nubank was valued at around $30 billion. Given it achieves the targeted valuation, it will become the most valued fintech in the whole world. It is also speculated that Nubank might seek a valuation near the $100 billion mark.

The post Brazilian fintech Nubank acquires Spin Pay to boost payment offerings appeared first on International Finance.