Pix And Cards Spur Cashless Payment Growth In Brazil

November 24, 2022
Despite previous predictions by Brazil’s central bank president that credit cards could be on the way out in the country, the latest annual statistics show that, along with the Pix instant payment platform, they are a key driver for growth of non-cash payments.

Despite previous predictions by Brazil’s central bank president that credit cards could be on the way out in the country, the latest annual statistics show that, along with the Pix instant payment platform, they are a key driver for growth of non-cash payments.

On Tuesday (November 22), the Brazilian Central Bank (BCB) published its full annual payments statistics for 2021, revealing impressive growth of non-cash payments in the country, driven by success of the popular Pix mobile payment services and cards.

Brazil, which is undergoing a significant process of payment modernisation and fintech innovation, recorded a 40 percent increase in the number of non-cash transactions in 2021, reaching 59bn.

Meanwhile, the total value of non-cash payments jumped 27 percent during the year to BRL76.9trn ($14.3bn), equivalent to around nine times Brazil’s GDP, according to the central bank.

Pix and cards leading the way

The growth in the number of non-cash payments was largely driven by Pix, Brazil’s popular instant payment system, which has grown to be a significant tool to increase financial inclusion in the country.

There were 9.6bn Pix transactions in 2021, its first full year of operation, and current growth rates suggest it will more than double in 2022.

There were 523.2m Pix keys registered for the service as of October this year, which in a country of 214m is more than two per person. Brazilians can register up to three Pix keys each.

The central bank adds that the surge in cashless payments was also due to the expansion of the Brazilian cards market. Credit cards, in particular, increased 32 percent in terms of number of transactions in 2021, while total spend increased by 38 percent during the same period. Debit cards also showed strong positive growth as transactions jumped 18 percent during the year.

The statement comes just three months after the BCB’s president, Roberto Campos Neto, made headlines with his prediction that credit cards would cease to exist in Brazil once open finance unfolds to its full potential.

Although much of the spotlight in 2021 was on the rapid growth of Pix, prepaid cards was also a star performer which stood out, according to the central bank, registering a 213 percent increase last year.

As reported by VIXIO, prepaid cards have played a role in policymakers' efforts to bring lower-income people into the traditional financial system.

The BCB stats suggest prepaid cards are fulfilling this role in terms of financial inclusion, with the product typically used to make significantly lower-value payments compared with other card types. For example, the average transaction value on prepaid cards was BRL31 ($5.7) in 2021, compared with BRL123 ($23) on credit cards and BRL67 ($12.5) on debit cards.

The central bank says that prepaid cards accounted for 13 percent of all card transactions in 2021, up from just 6 percent in 2020.

Prepaid cards are typically offered by fintech payment firms and were initially left out of Brazil’s debit card interchange fee regulations, with the intention of supporting the growth of the market; until they grew big enough.

In late 2021, acquirers started to complain that as a result of the differential regulatory treatment, acquirers are making losses on accepting prepaid cards.

The latest data published by the BCB shows that the interchange paid on prepaid cards (1.25 percent) was in practice more than twice as high as the fee paid on debit cards (0.54 percent), a difference that often had to be paid by the acquirer as they claimed.

As a result, in September, the BCB updated its interchange fee regulations to limit prepaid card interchange fees to 0.7 percent and substantially reduce their settlement cycle. The new requirements are set to enter into force next April.

Central bank data also shows that credit card interchange, which is unregulated in Brazil, averaged 1.61 percent of the transaction value in 2021.

Elsewhere, the number of direct debit and Boleto transactions both increased 9 percent during the year; however, their overall share of total non-cash transactions fell to 11 percent and 10 percent, respectively.

Boleto is a popular ticket-based payment service in Brazil, which allows consumers to pay for goods and services, including some ecommerce transactions, by settling an issued ticket at ATMs, bank branches, via internet banking, post office, lottery agent and some supermarkets.

The number of Interbank and intrabank credit transfers decreased slightly during the year; however, this may be due to migration to Pix as users switched many of their P2P transfers to the new instant payments platform. The number of cheques also fell during the year.

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