Good stuff. Been following Pix from afar. One of the things that interests me is the driving force that has come from the Central Bank - and without a doubt it has been a game changer for financial inclusion (as Carlos Neto noted at a G20 meeting a while ago).
However, I think you down play the financial crime risk. Reuters reported in 2023 that every year since Pix launched, social engineering attacks have increased. In 2022, crooks stole an estimated 2.5 billion reais by financial scams, and about 70% of them involved Pix. https://www.reuters.com/article/idUSL8N37Z4E1/
A while back São Paulo legislators tried to ban the service.
The drive of the central bank is certainly the reason why Pix is so successful. In their report (referenced in the footnotes) they make it clear they stepped up to the plate because no one else would and nothing would have happened unless they had done so.
In 2017, I facilitated one of their meetings in London when they were on their fact finding tour of the world's real-time payment systems - it was clear they were very driven and in a hurry; and also clear they thought they could do better than the UK Faster Payments system (which they have, in spades).
Fraud and crime are a function of society. Payments systems will always attract fraudsters, the trick is to anticipate them, put in controls against the obvious frauds and harden the system based on actual experience of the unforeseen as it emerges.
It is easy for the naysayers to criticise a new payment system by focusing on fraud, but the correct response is to fix the vulnerabilities rather than limit the system. It is obvious that Pix is a huge benefit to Brazilian society and fraud is a negative side effect that is being dealt with, but overall the benefits far outweigh the downside.
"We have two options: to step forward into growth or to step back into safety." (Maslow).
Totally agree - although (without knowing the politics of it) I found it noteworthy that the biggest city in Brazil threatened to shut down a payment system (albeit no idea how/if they could do it) apparently because of the amount of criminal behaviour on the system. Just imagine if London said no more FPS because of APP fraud?
There are always edges that criminals exploit, as you say the trick is to do the best you can to fix vulnerabilities ideally before they manifest themselves. The worst folks can do is ignore the foreseeable harms, as they have habit of blowing up in everyone’s face.
Good summary of Pix, it's a very useful intervention and my friends and colleagues in Brazil all use it intensively. How is Pix paid for? I did think it was a public serviceI but understand it still has to use the digital rails provided by Visa and Mastercard. If so, do you know anything about this, such as how much and how they charge the government and/or clients?
Visa and Mastercard are completely separate networks and Pix is independent of them. However, in addition to bank accounts connected to Pix, banks and Fintechs issue prepaid wallets which are used on the Pix network e.g. Nubank, Mercado Pago, C6, RecargaPay. These prepaid wallets can be funded by Visa/Mastercard debit cards and credit cards and also by using Visa Direct and Mastercard Send which are real-time money transfer services. Some Fintechs are connecting these to Pix wallets for real-time cross-border payments/remittances. Also, some are integrating with cards so the user can send a Pix payment with their credit card e.g. PicPay.
Excellent intro and overview to PIX. Learned a lot. Thank you!!!
Good stuff. Been following Pix from afar. One of the things that interests me is the driving force that has come from the Central Bank - and without a doubt it has been a game changer for financial inclusion (as Carlos Neto noted at a G20 meeting a while ago).
However, I think you down play the financial crime risk. Reuters reported in 2023 that every year since Pix launched, social engineering attacks have increased. In 2022, crooks stole an estimated 2.5 billion reais by financial scams, and about 70% of them involved Pix. https://www.reuters.com/article/idUSL8N37Z4E1/
A while back São Paulo legislators tried to ban the service.
https://www.al.sp.gov.br/noticia/?30/11/2021/alesp-aprova-tramitacao-mais-rapida-a-projeto-que-suspende-o-pix-no-estado-de-sao-paulo [in Portuguese]
I guess where there is money and payments there will always be crooks - the question becomes one of how you deal with it and who carries the can.
Thanks again for the feedback James.
The drive of the central bank is certainly the reason why Pix is so successful. In their report (referenced in the footnotes) they make it clear they stepped up to the plate because no one else would and nothing would have happened unless they had done so.
In 2017, I facilitated one of their meetings in London when they were on their fact finding tour of the world's real-time payment systems - it was clear they were very driven and in a hurry; and also clear they thought they could do better than the UK Faster Payments system (which they have, in spades).
Fraud and crime are a function of society. Payments systems will always attract fraudsters, the trick is to anticipate them, put in controls against the obvious frauds and harden the system based on actual experience of the unforeseen as it emerges.
It is easy for the naysayers to criticise a new payment system by focusing on fraud, but the correct response is to fix the vulnerabilities rather than limit the system. It is obvious that Pix is a huge benefit to Brazilian society and fraud is a negative side effect that is being dealt with, but overall the benefits far outweigh the downside.
"We have two options: to step forward into growth or to step back into safety." (Maslow).
Totally agree - although (without knowing the politics of it) I found it noteworthy that the biggest city in Brazil threatened to shut down a payment system (albeit no idea how/if they could do it) apparently because of the amount of criminal behaviour on the system. Just imagine if London said no more FPS because of APP fraud?
There are always edges that criminals exploit, as you say the trick is to do the best you can to fix vulnerabilities ideally before they manifest themselves. The worst folks can do is ignore the foreseeable harms, as they have habit of blowing up in everyone’s face.
Good summary of Pix, it's a very useful intervention and my friends and colleagues in Brazil all use it intensively. How is Pix paid for? I did think it was a public serviceI but understand it still has to use the digital rails provided by Visa and Mastercard. If so, do you know anything about this, such as how much and how they charge the government and/or clients?
Pix is run by the Central Bank of Brazil. It probably charges banks that use it a small transaction fee to cover its costs but it is the banks who set their own fees for their customers. Typically, personal payments are free and payments to retailers and billers incur a fee paid by the retailer of 0.22% of the transaction amount according to this article. https://www.reuters.com/business/finance/brazils-pix-payments-are-killing-cash-are-credit-cards-next-2024-04-02/?utm_source=chatgpt.com
Visa and Mastercard are completely separate networks and Pix is independent of them. However, in addition to bank accounts connected to Pix, banks and Fintechs issue prepaid wallets which are used on the Pix network e.g. Nubank, Mercado Pago, C6, RecargaPay. These prepaid wallets can be funded by Visa/Mastercard debit cards and credit cards and also by using Visa Direct and Mastercard Send which are real-time money transfer services. Some Fintechs are connecting these to Pix wallets for real-time cross-border payments/remittances. Also, some are integrating with cards so the user can send a Pix payment with their credit card e.g. PicPay.