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Brazil’s Pix Payment System Threatens Credit Cards’ Dominance in E-Commerce
In just three years, Brazil’s popular Pix payment system has become the country’s favorite way to pay, replacing cash and wire transfers in many cases. The instant payments designed by Brazil’s central bank are 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.
A Threat to Credit Cards
“I think credit cards will cease to exist at some point soon,” said Roberto Campos, central bank chief. “This system eliminates the need to have a credit card.”
Market trends have since added weight to his forecast. Use of Pix surged 74% last year 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.
The Rise of Pix
For buyers, the switch to Pix has been nearly seamless, as they simply scan a QR code with any banking app instead of reaching for their wallet. But for sellers, it has turned the tables on the traditionally lucrative card payments industry.
- Orders paid with Pix surged 22 percentage points in two years to about a third of all purchases in December, according to e-commerce research firm Neotrust.
- Credit card orders slipped 5 percentage points to 51% in the period.
Pressure on Card Networks and Payment Processors
The growth of Pix has put pressure on the card networks, which receive no cut of such transactions, and payment processors, which pocket a much smaller slice than they get for credit or debit card purchases. Pix costs an average 0.22% of each transaction for retailers, whereas debit card fees run over 1% and credit card fees can reach 2.2% of each sale in Brazil, according to a Bank of International Settlements paper.
New Features to Boost Pix
The central bank is now preparing to roll out new features boosting the appeal of Pix for P2B use, according to Mayara Yano, senior advisor to the Pix management and operations department at the central bank. The first feature will allow for automatic payment of recurring bills, while another feature will enable payments in monthly installments, a major perk of credit cards for Brazilian consumers.
The Future of Credit Cards
These changes are likely to accelerate the rise of Pix, which is now dictating the payment landscape in Brazil, said Carlos Netto, CEO of Matera. “It is setting the standards for a digital finance revolution, representing the most concrete threat to credit cards.”