Brazil is among the countries embracing the cashless movement and the Central Bank is taking a step further to implement its own digital currency. The Brazilian CBDC has the potential to be a game-changer for the Brazilian payments and financial markets.
Brazil Central Bank’s (BCB) agenda to implement a CBDC (Central Bank Digital Currency) in the country is moving forward, following the lead of some other governments around the world in the cashless movement, such as Japan, Korea, the U.S., and Sweden.
BCB’s first attempt to enter the digital payment landscape was with the successful instant payment method launched at the end of 2020, Pix. The second was the implementation of Open Banking.
Pix intensified the “going digital” trend due to its instant success after launching. The real-time payment method brings inclusivity to many people, including, for instance, underbanked ones (34 million of the population) and informal workers (38 million).
Pix collects impressive numbers, and by now, it has outgrown all payment methods, according to recent data. However, according to BCB, CBDC is the next step toward the digitalization of fiat money.
What’s a CBDC?
According to the Atlantic Council, “a Central Bank Digital Currency (CBDC) is the digital form of a country’s fiat currency that is also a claim on the central bank. Instead of printing money, the central bank issues electronic coins or accounts backed by the full faith and credit of the government.”
The International Monetary Fund declared that the implementation of virtual currencies happens for many reasons, including improving cross-border operations, especially payments, financial inclusion, and digitalization of the economy.
However, they say the goal isn’t to replace cash but to reduce friction and hurdles and cover gaps that fiat money struggles with. The BCB explains that the Brazilian CBDC will solely be a new way of representing the sovereign Brazilian currency already issued under the country’s monetary policy (i.e., the Brazilian real).
CBDC Vs. Crypto
Governments’ virtual currencies may need to use blockchain technology – and although both are digital money, similarities stop there. The main difference between CBDC and cryptocurrencies is the regulation.
Cryptos are decentralized and use distributed-ledger technology, meaning they don’t depend on a central hub to operate; instead, their transactions are run by multiple devices worldwide, whereas CBDC is issued and controlled by a Central Bank.
Payment Trends in Brazil in the Upcoming Years
As the payment world goes digital and the strong cash culture is slowly being replaced by a cashless one, real-time payments are gathering momentum. Brazilians have their own way of paying for their goods, such as the traditional boleto bancário, credit card with installments, and now with the remarkable Pix – some more attractive to the public than others.
Payment links, for instance, allow merchants with no website to sell their products and services through social media and instant messaging apps using a URL for payment. This payment alternative has become trendy in the country because Brazil leads the global ranking on average hours spent on mobiles per day.
Another popular payment trend is the subscription payment method, also called recurrency payments. Set to boom – a trend that has continued as social digital services became ubiquitous all over the national territory – the secret to its tremendous popularity lies in the Brazilian market’s four passions: discounts, advantages, exclusivity, and convenience.
PagBrasil aligns market trends with the particularities of the Brazilian market and offers unique solutions, helping multinational companies to run a hassle-free digital business in Brazil – such as the subscription management system, PagStream®, and the easy-to-integrate Payment Link. Get in touch with our team today and learn more!