Brazil’s Digital Payments Transformation: Five Key Takeaways

Brazil has abundant growth opportunity when it comes to digital payments, with PIX – the Central Bank of Brazil’s new instant payments system – expected to have a significant impact. This was evident during a recent webinar Digital Transformation into Payments, hosted by Mercado & Consumo em Alerta and featuring experts from Getnet, Pernambucanas, Conductor and ACI.

Here are five key takeaways based on insights shared by the experts:

1. Big room for digital growth

When it comes to paying household expenses, Brazilians still use cash nearly 40 percent of the time, with 43 percent of payments being made by electronic means. Compare that with South Korea and Sweden, among the most digital payment-savvy nations, where electronic means are used for roughly 80 percent of household expenses.

This means that potential for growth is huge. Brazil’s financial inclusion initiatives, backed by the development of PIX, stand to make digital payments far easier and more accessible to the average citizen. This will benefit not only consumers, who will enjoy greater convenience and payments security, but also financial institutions, who can now offer services or handle transaction volumes at a reduced cost.

2. Retail will serve as a driver of success

Given its unique access to consumers, merchant retail is one of the most important vectors of the Central Bank’s PIX strategy. Consumer demand often drives retail payments innovation, which in turn drives banking innovation. Retailers can leverage PIX to enhance the use of digital payment methods, while also offering new credit products to consumers not served by traditional banks.

According to Conductor, the Brazilian merchant retail market is large enough to support robust competition, without the hugely dominant platforms that account for most of the market share in markets such as China. Well-established local and regional retailers can leverage their existing digital portfolios to further integrate with partners and the network, spurring new innovations in the consumer experience. This will ultimately benefit the end consumer, as well as the Brazilian economy.

3. Brazil’s national infrastructure is ready

According to Getnet, the companies that currently make up the national technology network are ready to absorb and process the increase in digital transaction volumes. This may be the most critical piece of the PIX puzzle. Not only is the infrastructure ready for the digital volumes, it can also handle physical volumes.

This preparedness will allow Brazilians to immediately experience the benefits of PIX, which should in turn drive further adoption and satisfaction.

4. Fintechs will drive the final mile

Fintechs have become an established part of the Brazilian financial system, so it is no shock that they will become essential partners in enhancing the PIX experience. The added upside is that there are now regulations in place that protect the market should a fintech collapse or enter into bankruptcy.

While partnering with fintechs, banks will remain a fundamental pillar of the financial ecosystem – ensuring credibility.

5. Communication is key

Make no mistake, consumers will quickly shift their payments to these newer, faster, more exciting methods. Customers of Pernambucanas are already using their digital wallets and credit in the supermarkets, for example. But it is the responsibility of businesses to communicate with the consumer on using new payment methods.

Employees should be trained to assist consumers when necessary, and to promote new payment offerings and the benefits of using them. Consumers who have a bad experience may abandon the payment method (or the retailer) altogether, making it essential that a consumer’s first interaction be simple, positive and satisfying.

Of course, COVID-19 has also greatly impacted the payments innovation curve. 2020 will be marked as the year of digital payments acceleration, increasing demand for omni-channel shopping experiences, eCommerce transactions and contactless payments. While the trends were already evident, the COVID-19 pandemic has brought them into greater focus. Brands must support consumers in every channel, reducing friction and increasing security to drive conversions and loyalty.

 

For greater insights, listen to the full Mercado & Consumo em Alerta, “Digital Transformation in Payments” webinar on demand.

 

Read this blog post in Portuguese  

 

 

*All stats are estimates by the speakers and courtesy of Mercado & Consumo em Alerta, “Digital Transformation in Payments”