What are instant payments?
Instant Payments are electronic money transfers between different institutions where the payment message transmission and fund availability to the final beneficiary occur in real-time and whose service is available to end-users 24/7.
The Central Bank in Brazil saw the need to create and regulate this new payment arrangement because of the digitalization of e-commerce and the current gap in payment methods.
What is PIX?
Pix is the system the Brazilian Central Bank created to bring instant payments to life and has been serving as a successful case story to other emerging markets.
One year after its creation in November 2020, Pix increased 14,000%, and by January 2022, it was already used by 71% of the population in Brazil. The last reports from the Brazilian Central Bank showed that Pix generated a monthly volume of BRL 600 million (more than USD 100 million) of funds transferred.
Although it has more features, such as Pix Troco (receive changes after purchases) and Pix Saque (cash withdrawal), it allows transfers between bank accounts within seconds, at any time or day. It is practical, fast, safe and accessible to people, while it enables all wallets that use QR Codes to be interoperable. This means that transfers and payments are allowed from one e-wallet to another in real-time, 24/7.
Differences between digital wallets and instant payments - including Pix
Instant payments, or real-time payments, are electronic payments that work 24/7, 365 days a year, and allow the recipient to receive funds instantly. Pix is an excellent example of a successful instant payment. It has caused a shift in the Brazilian payments industry since it doesn't need intermediaries such as card schemes, acquirers, or issuers to work.
Digital wallets, on the other hand, are online payment tools managed by companies that store credit card information for users and let them top up the balance of a transactional account to make the checkout process more accessible.
Another significant difference is that instant payments allow the interoperability of all digital wallets, meaning that an account holder of e-wallet A can transfer funds to an account holder of e-wallet B without any hassle and in real time.
Both use the same technology in most cases (QR Code and NFC), but instant payments are the next step of digital wallets.
For digital commerces
Instant Payins and Payouts
Since Pix is a real-time payment, merchants can receive funds anytime after a sale and eliminate intermediaries. Also, companies that offer Pix can provide a better customer experience since it has become a trendy payment method in Brazil due to all its features.
Regarding suppliers, digital commerces can pay vendors, contractors, gig workers, or any partner instantly, which leverages their satisfaction and improves business relationships. This opens a room for better negotiation and payment conditions.
Pix allows better cash-flow management because funds become instantly available and can be reinvested or used to pay debts faster. In the end, decision-makers will have more flexibility when choosing what to do with the money since they will not struggle with the strict deadlines required by other payment methods, such as credit cards or boletos, to have the funds available.
Pix reduces the risk associated with sales, especially for digital commerces. It is less prone to fraud since it can be used directly on smartphones and doesn't require a card password or an ATM. Moreover, Pix has a very robust technology developed by the Brazilian Central Bank.
Instant payments are a significant competitive advantage for digital commerce. First, since Pix eliminates intermediaries in the payment chain, digital commerces face fewer charges. Thus, businesses can offer more competitive prices for their products/services. Finally, bear in mind that Brazil has almost 250 million active smartphones. These devices potentialize the use of digital payments, especially Pix, and fulfil the increasing Brazilian consumer purchasing immediacy.
Free to use and real-time
Although Pix has some fees for businesses, it is accessible to people. Aligned with its real-time advantage, it conquered Brazil's heart and became a tool of financial access and inclusion for those who aren't creditworthy.
Brazilians don't need to worry about making transfers only during banker's hours or waiting up to 3 business days to complete a payment (in the case of boleto payments). Pix is always available, and the Brazilian Central Bank is developing some features to allow Pix to be used offline and for international transactions.
As safe as wire transfers
Pix transactions are as safe as wire transfers because they rely on authentication and cryptography. The Brazilian Central Bank safeguards all personal Pix users' data in compliance with all local rules and regulations.
The impact on financial inclusion
Another reason to bet on Instant Payments is to include the unbanked population in the financial system. In 2017, 70% of the Brazilian population was considered bankarized, according to the Central Bank, leaving 48M without access to a debit card, credit card, or bank account.
When asked why they don't have a bank account, 49% don't trust banks, 31% say they don't have enough money to do so, and 29% prefer to use cash.
Our banking system has gaps in terms of payment methods: a large chunk of the population doesn't trust banks enough to open up a bank account or don't do so because of the idea that the fees that come with it and its credit/debit cards are simply too much to handle with their monthly budget.
Pix took out the need to deal with traditional banks and the cultural baggage that led some Brazilians to not trust them, besides cutting off the high credit and debit card usage fees. This payment method has brought these people into the financial system, legitimising how they move money around and reducing the cost of maintaining paper money in circulation.
Start offering Pix as payment method with EBANX
Pix is the current big thing in Brazil, and any global tech company willing to sell to Brazilians can't overlook this critical payment method. So, count on EBANX's local expertise to enable Pix in your business!