The year in which Brazil embraces digital payment once and for all

by Kelvin
The year in which Brazil embraces digital payment once and for all

Whether the “credit or debit?” represented the almost total disappearance of “cash or check?” at tellers from north to south, the new revolution in payment methods seems to be more focused on the platform than on the form. Excuse the play on words, just look at the numbers to notice that electronic payment methods are gaining more and more space among Brazilian consumers in both retail and electronic commerce.

A recent survey by the Capterra platform among Brazilians who are part of the labor market indicates that 59% of respondents have already carried out operations by bringing their cell phones closer to payment machines, in the so-called contactless. Another study recently published by the journal Mobile Time indicates 35% growth in this type of transaction between September 2019 and March this year.

Large card brands, such as Mastercard, are already discussing the increase in the limit for contactless transactions without the need to enter a password

  

With the social distance and the adoption of new hygiene measures caused by the new coronavirus, large card brands, such as Mastercard, are already discussing the increase in the limit for contactless transactions (with mobile devices or cards) without the need to enter a password, which are currently limited at BRL 50.

But what to expect from such a change of habit in a country that, at the same time that it occupies the top positions in world rankings of fintechs, has a large part of the population dependent on the informal economy and cash payments? According to the Brazilian Institute of Geography and Statistics (IBGE), 60 million people are unbanked in Brazil.

Payment standardization

One of the current headaches for merchants and consumers when using digital wallets is the lack of standardization of devices and machines. The project for instantaneous payments PIX, recently launched by the Central Bank (BC) and expected to be implemented in November, seeks to eliminate this problem.

The initiative is part of the BC agenda, a project to modernize the national financial system. Still in the thesis stage, the PIX covers several fronts. In the first one, it would serve as a substitute for the old TEDs and DOCs by adopting keys or nicknames (such as phone number, CPF, CNPJ or email) used to identify the account to which the money will be transferred. Unlike current transactions, with time and weekday restrictions, the PIX will be available 24 hours a day and 365 days a year.

At the time of payment, the cell phone number provided, for example, will be located on the DICT, and the recipient will be identified in a secure and practical way

This facility will be enabled thanks to a directory managed by the BC with all the information on the recipients, in the so-called Transactional Account Identifier Directory (DICT), which will store the account data. At the time of payment, the cell phone number provided, for example, will be located on the DICT, and the recipient will be identified in a secure and practical way.

In Spain, Bizum, a similar service adopted by the country’s main financial institutions such as Santander and BBVA, recorded more than 60 million transactions in 2019 worth 2.7 billion euros (about R$17 billion).

BC’s second bet with the PIX is QR code payments, which have also been growing among Brazilian consumers, as Capterra points out. Here, the main detail is the introduction of the “BR Code”, a unique QR code pattern that can be read by various camera devices. Today, machines with the option of payment by QR code available in establishments only accept transactions from customers of the institution that provides the equipment or from a few affiliates.

With the BR Code, the objective is to avoid machine confusion, similar to what happened a few years ago, when the equipment only accepted certain card brands

With the BR Code, the objective is to avoid machine confusion, similar to what happened a few years ago, when the equipment only accepted certain card brands. In other words, the same code will apply to payments with different arrangements, which involve three links: financial institutions, companies that supply the machines and card brands. The user will be able to choose what he wants to use and the machine will process the payment according to the chosen system.

Together with the proliferation of digital banks, the ease of these types of payments can represent a great incentive for adoption by millions of Brazilians. Furthermore, as in practice all financial institutions will have to adopt the system, the chances of popularization increase. Among the open questions are transaction fees, which should become cheaper, and the implementation of a new support for payments by approximation.

open banking

Another point on BC’s agenda is open banking, presented on May 4th. According to the institution, the new regulation will allow, as long as there is prior consent of the customer, “the standardized sharing of data and services through the opening and integration of systems, by financial institutions, payment institutions and other institutions authorized to operate by the Central Bank “.

Banks and savings banks, classified as S1 and S2 by BC, will be required to participate. With this exchange of information, changing banks, for example, would be much easier, similar to what happens today with cell phone operators. The implementation will be carried out in four phases and will start in November, coinciding with the planned start of operation of the PIX. The process is expected to last until October 2021.

There are still uncertainties between banks and fintechs about several points of the new regulation, and the crisis of the new coronavirus also raises doubts about the timetable. It is worth remembering that another important law related to the processing of consumer data, the General Data Protection Law, which should enter into force in August, has been postponed to May next year.

waiting for changes

The changes in the scenario of payments and financial transactions will be many and reflect a heated market: two national fintechs have already reached unicorn status (startups with a value of US$ 1 billion or more) and several companies are in line to reach the position, such as Conta Azul accounting platform and the financial administration app for individuals in Guiabolso.

The uncertainties caused by the crisis of the new coronavirus can, however, delay investments.

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Lucca Rossi, author of this opinion piece, is a content and research analyst for the software reviews and comparison site Capterra, where he writes about technology and produces studies on trends in the area for small and medium-sized companies.