One of the most successful examples of Digital Public Infrastructures in the context of payment, is Brazil’s PIX system. This article explains the advantages of PIX in contrast to previous payment infrastructures and shows how it could be an example worth transferring to other countries.

Have you ever wondered why it takes such a long time to transfer money from a PayPal account to a regular bank account and vice versa, or why credit card fees are often so high? A major reason lies in the organization of digital payment infrastructures. In most countries, these infrastructures are not public but owned by private entities, explaining the lack of a universal protocol that allows instant transfers between bank accounts and payment providers like PayPal and Venmo. Instead, instant transactions are associated with high fees these companies charge for using their protocols. Additionally, this setup enables credit card companies to charge substantial fees for processing payments.

A Public-First Solution: Brazil’s PIX System

A different approach can be seen in Brazil’s digital public payment infrastructure, PIX. The name, derived from the Portuguese word for “pixel,” symbolizes the granularity and speed of the transactions it enables. Launched in 2020 by the Central Bank of Brazil, PIX marks a significant shift in the country’s payment system. It allows instant transactions between individuals at almost no cost. Each transaction between entities is facilitated by a protocol that ensures both parties use a common framework, similar to how the Simple Mail Transfer Protocol (SMTP) enables the exchange of emails across different platforms.

Before PIX, payment transactions were handled by private protocols, often owned and maintained by entities like credit card companies, which charged high fees, or by systems that were notably slow. The primary goal behind PIX was to reduce cash transactions and provide a fast, affordable alternative to existing payment methods, benefiting a broader segment of the population.

Features of Pix: Interoperability and Low Fees

One of Pix’s key features is its interoperability, allowing users to make transactions through various channels such as mobile apps, internet banking, ATMs, and even in-person establishments. Unlike traditional systems, PIX enables instant transactions from a bank account to a PayPal account almost free of charge, ensuring accessibility for a broad spectrum of users regardless of their technological proficiency. Users can initiate transactions using simple identifiers like email addresses, mobile numbers, or QR codes, eliminating the need for traditional banking information like account numbers and branch codes.

Another significant feature of Pix is its low transaction fees. High fees charged by banks and payment providers contribute to the prevalence of cash transactions in countries like Germany. In Brazil, credit card transaction fees can reach up to 2.2%, whereas PIX charges retailers only an average of 0.2% per sale and is free for individuals. This cost efficiency has made PIX extremely popular; last year, 42 billion transactions were processed through PIX, marking a 72% increase. For the first time, Pix transactions also surpassed credit and debit card transactions by 23%. Thus, Pix has not only reduced cash transactions but also posed significant competition to debit and credit cards.

Achieving Financial Inclusion

Arguably, Pix’s most important impact has been on financial inclusion, a key enabler for achieving the 2030 Sustainable Development Goals (SDGs). Financial inclusion, featured as a target in eight of the seventeen SDGs, allows individuals to manage risks, invest in opportunities, and build assets, contributing to economic development and poverty alleviation. Pix has facilitated transactions for over 50 million previously unbanked individuals, significantly advancing financial inclusion in Brazil.

A Model for Digital Public Infrastructures

The success of Pix demonstrates the transformative potential of digital public infrastructures. Pix is not alone in this regard; India’s Unified Payment Interface (UPI) is another successful example. The popularity of these systems should inspire policymakers, particularly in the EU, to develop a truly public digital infrastructure.

In conclusion, Pix showcases how a well-designed digital public payment system can transform financial transactions, promote economic inclusivity, and challenge traditional financial systems.

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