Acceleration of the Digital Economy in Brazil: Risks, Challenges and Solutions

In our recent Making Payments webinar, experts from Mastercard, Microsoft and ADIQ shared their insights on how they were able to overcome the most pressing innovation challenges within Brazil, and how other organizations can prepare for the future of digital payments.

Here are the highlights – including recommendations and an outlook on the future of Brazil’s digital economy.

Acceleration of inevitable change?

While the pandemic accelerated the digitization of the Latin American economy, challenges soon emerged and companies had to meet the demand by responding quickly and decisively — all while undergoing their own digital transformations to maintain market relevance. For the payments industry, increased fraud, new players entering the payments ecosystem and the tangible need for financial inclusion represented the top priorities to be addressed.

The experts agreed that the pandemic was responsible for accelerating the digitization that was already inevitably underway, challenging the industry to quickly adapt to new means of payment. Large corporations, in particular, had to rethink their business models to offer the best customer experience.

How does PIX affect this acceleration?

The real-time payments model (i.e., PIX) brings a new reality. Brazil, and Latin America more broadly, are moving towards carrying out payments with very low or non-existent transaction fees that previously took hours or days to be processed; these now take less than ten seconds.

In addition, digitization has enabled greater financial inclusion as it has opened the market to more players, with new and different services multiplying alternative payment methods. With the crisis, the percentage of Brazilians making transactions with physical cash has dropped from 86 percent to 74 percent.

Growing digital inclusion is also enabling an evolution in the use of data, through open banking and open finance. By giving consumers an easier, safer way to share their data, organizations can create more personalized, customer-centric experiences and offerings that will further drive financial inclusion.

What is the key to navigating this changing landscape and maintaining relevance?  

The key to navigating Brazil’s rapid change is allowing merchants to offer several alternative payment methods to satisfy a wide range of customer preferences. Financial institutions must also create conditions that allow people to maximize the benefits of open banking and open finance.

The focus for all should be on delivering a better experience for consumers, offering the market what it demands and not forcing adherence to a single system. Collaboration between key players is also important. Working together will not only accelerate innovation and deliver a more comprehensive modernization output, it will ensure financial institutions are offering the payments and services that keep them relevant within the payments chain.

Lastly, the acceleration of the digital economy means that companies must implement new fraud management solutions. According to Microsoft’s Fabio Mittelstaedt in our recent webinar, new digital channels experienced a 276 percent increase in fraudulent attacks during the pandemic, showcasing the urgent need for increased vigilance as the landscape continues to shift.

For more insights, watch the full on-demand webinar Acceleration of the Digital Economy in Brazil: Risks, Challenges and Solutions (Portuguese)