The Central Bank of Brazil is developing an instant payment system that will confirm transactions within a few seconds, without any restrictions regarding date or time of day. The system, which is expected to be ready by 2021, will no longer require an intermediate bank for transactions. The model follows a worldwide trend that is already fully active in 45 countries, according to InstaPay tracker.
What will change
Instant payments will significantly impact financial operations in Brazil. Not only will Brazilians experience faster payment methods with lower costs, this new model also represents opportunities for all sorts of businesses – from small merchants to large fintech companies.
No more bank transfer fees
Aside from the account maintenance fee, most banks in Brazil also charge a fee per transaction, which adds significant annual costs to clients. Online bank transfer transactions, for instance, may cost up to BRL 9.70. With the new system, Brazilians will be able to transfer to any account, with no additional costs.
Real-time money transfer
There are two models of bank transfer in Brazil: the TED transfer – Available Electronic Transfer – which allows same-day compensation, and DOC transfer – Credit Order Document – which is compensated for the next business day.
However, even TED transfers have their limitations: transactions are only available during business days between 6:30 a.m. to 5 p.m. The new model will allow real-time transfer, accelerating money flow and bringing positive impact to the economy.
No more personal data required
Today, bank transfers are only possible if the recipient provides the payer his name, CPF number – the Brazilian individual taxpayer registry identification – bank and account information. With the new model, payers will be able to complete transactions with the recipient’s phone number or e–mail address.
QR Code payments
QR Code usage is not very popular in Brazil, but this might change once the instant payment model is active. The new system will allow Brazilians to either pay or receive payments for purchases by scanning a QR Code with their smartphones. This will allow a more agile and democratic payment solution with lower costs, as small merchants will not necessarily require card machines to complete transactions.
The impact of instant payments in Brazil
“Imagine a vendor selling ice-cream at the beach and receiving his payment with a QR Code on his mobile phone,” says Ralf Germer, CEO and co-founder at PagBrasil. This is the sort of impact Brazil is facing: solutions that allow financial inclusion. Instant payments will provide faster and safer transactions for everyone, anywhere.
After all, smartphone usage is already widespread in Brazil: 67% of the adult population in the country have access to smartphones. On the other hand, over 45 million do not have a bank account, according to Locomotiva Institute. Instant payments will favor a great percentage of the population who own mobile devices, but do not have access to traditional banking or payment services.
This ground-breaking resolution will also allow opportunities for payment processors, digital banks, and fintech companies, which will be able to develop platforms dedicated to this new scenario. In China, for instance, private companies such as WeChat Pay and Alipay already hold a large percentage of electronic payments in the country. “The main difference is that the Brazilian system is being defined by the Central Bank of Brazil and will not be controlled by private companies,” explains Mr. Germer. With an open system, all market players may take part in this scenario. “This is good for the country, because customer needs remain a priority,” adds the entrepreneur.
Recent data has shown that out of the 553 fintech companies born in Brazil, 115 are under the “Payment Methods” category, with 68 payment processors, and 24 are focused on mobile payment solutions. This highlights the fact that even in a country where cash is still one of the predominant payment methods, investing in innovative payment solutions is a prosperous opportunity.