Brazil Presses On With Payments Modernisation Journey

February 15, 2022
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Brazil has ambitious plans to continue on its successful path towards payments modernisation in 2022, bringing new features to its PIX instant payment network, expanding open finance functionalities and carrying out a central bank digital currency pilot.

Brazil has ambitious plans to continue on its successful path towards payments modernisation in 2022, bringing new features to its PIX instant payment network, expanding open finance functionalities and carrying out a central bank digital currency (CBDC) pilot.

On Friday (February 11), Roberto Campos Neto, president of the Brazilian Central Bank (BCB), presented his agency’s economic outlook and agenda 2022, laying out the central bank’s plans to enhance the country’s payments modernisation initiatives.

New features for PIX

High on the list for the BCB’s 2022 roadmap will be to add new payment features to its instant payments service PIX. These include direct debits, non-priority settlements, PIX billing, and PIX account remuneration.

By supporting these new features, the central bank will hope to build on the phenomenal success in 2021.

In 2021, its first full calendar year of existence, PIX processed 9.5bn transactions. Following continuous growth throughout the year, it processed 1.46bn transactions in December alone with a total value of R$716bn.

Launched towards the tail end of 2020, the service has quickly established a strong market penetration, which the central bank claims reaches all groups regardless of income and age.

According to the roadmap, there were 395.2m PIX keys registered as of January 2022, belonging to 8.2m businesses and 111.8m individuals. This is in a country where the adult population is estimated to be around 170m.

However, as adoption has grown, so has its exposure to potential fraud or cyberattacks. Since its launch, there have been three hack attacks exposing PIX keys with the most recent taking place at the end of January.

It is worth noting though that the incidents took place in the systems of three PIX participants. The PIX network itself, managed by the BCB, was neither attacked nor accessed by hackers in these incidents.

In response to the attacks, the report highlights various steps the central bank has taken to mitigate the impact of future incidents. For instance, the BCB created a website designated for registering details of incidents, enhanced its monitoring exercise and applied sanctioning measures, where current legislation permitted.

Open Finance

Brazil adopted an open finance regulatory framework in four phases starting from February last year.

In October it launched phase 3 of its open finance project, allowing payments processors to offer payments initiation services through PIX. Previous phases had supported payments across other account-to-account payment services run by the central bank.

The report now says payments initiation institutions are finalising the onboarding process and “the service will be available to the public soon.”

The last phase of the framework, the expansion into open finance, kicked off in mid-December and is expected to enable data sharing for additional financial products, such as foreign exchange, insurance, or investment, eventually evolving into transactional data sharing.

It is in a progressive rollout phase, the BCB said, noting that institutions are currently conducting tests to certify their APIs.

In spite of open finance being in an early stage, the report highlights it is already gaining traction. Consumers have consented to data sharing in 3.3m cases, there were 221m calls made via APIs, and around 800 institutions joined the network as a participant.

Digital Real makes real

The BCB also has serious plans to move ahead with the development of a digital Real and is planning to launch a pilot by the end of the year.

BCB president Campos Neto announced the launch of "Lift Challenge - Digital Real" last December with an aim to evaluate the use cases and technological feasibility of a Brazilian central bank digital currency (CBDC).

Te digital Real is intended to “diversify the portfolio of means of payments available to citizens” and is planned to be used in conjunction with bank accounts, payment accounts, cards and cash.

The report now outlines a roadmap for the central bank’s plans regarding its work toward digital fiat in 2022.

The central bank is currently evaluating proposals received during the registration period for the Lift Challenge, which ran until last Friday (February 11).

The development of the project, which is estimated to take place between March and late July, will focus on decentralised finance (DeFi) protocols, delivery versus payment (DVP), payment versus payment (PvP), and internet of things (IoT).

The report now says the central bank will carry out pilot projects in the last quarter of the year.

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