Exploring the Cross-Border Payment Capabilities of Pix
Brazil's Pix instant payment system, owned and regulated by Banco Central do Brasil (BCB), has established itself as a revolutionary payment infrastructure, both domestically and internationally. The system, which has seen massive transaction volumes and wide adoption, is now actively expanding its cross-border transaction capabilities.
According to a recent platform report, inbound consumer remittances into Brazil grew by 21% in 2022. Pix has become a key tool in Brazil's financial sovereignty and broader efforts towards de-dollarization in global payments. The system enables Brazilians abroad to send remittances directly in reais, bypassing costly dollar conversions.
Pix currently handles over $450 billion in transactions in a single quarter and is widely adopted, with 76% of Brazilians using it regularly. Internationally, the system operates outside the traditional dollar network and is seen as a model for other emerging economies.
Brazil has established or is exploring local currency settlement agreements with neighboring countries like Argentina and Uruguay, under frameworks similar to Pix, to facilitate direct currency conversions and support regional integration. Discussions with countries like Italy indicate interest in bilateral agreements to implement Pix-based cross-border payments.
The system's recent expansion includes "Pix Automático," enabling recurring payments and further streamlining payment experiences for consumers and international merchants operating in Brazil. This aligns Pix with Open Finance initiatives aiming to integrate payment methods seamlessly across platforms.
However, the system has faced challenges, including cyberattacks involving thefts, illustrating operational risks as the system grows in scale and complexity.
Brazil aims to leverage Pix to enhance financial inclusion and reduce dependence on traditional global payment networks, especially those dominated by US firms. Continued cross-border integration and bilateral or multilateral agreements will likely expand Pix’s international reach, allowing direct local currency payments that avoid dollar clearing and reduce exchange costs and volatility.
The progression of Pix cross-border initiatives will be closely monitored, particularly in light of geopolitical tensions that may complicate its international expansion. The BCB is considering agreements to connect Pix with similar instant payment platforms in other countries, such as Nexus, a project spearheaded by the Bank for International Settlements.
Cross-border Pix could grow B2B payments in and out of Brazil, and the potential cross-border consumer payments market could be significant. Sending money to recipients in Brazil via Pix is possible from other countries but requires the assistance of specialised payment providers.
The ubiquity of the Pix app is evident with a population over the age of 15 totalling around 171 million in 2022. It could be highly beneficial for people sending and receiving remittances, as well as streamlining payments for Brazilian travellers and tourists in other countries. Since its launch in 2020, Pix has surpassed 160 million users, but other domestic projects are more immediately in the pipeline, suggesting that cross-border Pix is unlikely to happen any time soon.
Despite this, the potential benefits of cross-border Pix are undeniable, particularly in aligning with Brazil's ambitions to reduce the power of the US dollar over its economy.
The expansion of Pix's cross-border capabilities may revolutionize the finance and technology sectors, offering Brazilians abroad a direct method to send remittances in reais and bypassing costly dollar conversions. As the system grows, it could significantly impact the business landscape by increasing financial inclusion and reducing dependence on traditional global payment networks, particularly those dominated by US firms.
