Search Podcasts

Episode 187 – Fanning the Flames: A Year in Travel – Brazil

Yvette Bohanan

January 6, 2023

pix branding materials on computer

 

In 2022, travel started to get back to “normal” and the Glenbrook team had many opportunities to get out and about. No trip would be complete without running a few payments experiments. Over the next 5 Fanning the Flames episodes, we’ll take you with us on our journeys to hear first hand experiences and observations with local payment networks across the globe. 

To kick the series off, Elizabeth McQuerry joins Yvette Bohanan to discuss a recent trip to Brazil, her experience using Pix, and what to watch in 2023.

 

 

Yvette Bohanan:

Welcome to Payments on Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution. I’m Yvette Bohanan, a partner at Glenbrook and co-host of Payments on Fire. Today we are ringing in 2023 with one of our Fanning the Flames travel log podcasts in a series to talk with our team members who racked up lots and lots of miles around the world in 2022. We want to hear firsthand their experiences and observations with local payment networks across the globe. So joining me for this podcast today is Elizabeth McQuerry. Elizabeth, welcome to Payments on Fire.

Elizabeth McQuerry:

Great. It’s fun to be here. Thank you, Yvette.

Yvette Bohanan:

It’s always good to be here. I can’t believe we’re in 2023. 2022 was the year travel kind of started to open up again, so you got to get out and about a little bit. For this episode, what country is on the docket today?

Elizabeth McQuerry:

Yeah. Let’s talk about the things we learned in Brazil during our recent visit.

Yvette Bohanan:

Okay. So Brazil, was it Allen Weinberg who used to say Brazil is not for amateurs when it comes to payments? It’s a fairly complex country, right? And they’ve been doing a lot of work with their payment systems. So you’ve been there, to the country, a number of times. You’re kind of irregular. What stood out to you as being different, from a payments perspective, on your recent trip?

Elizabeth McQuerry:

Yeah, absolutely. Brazil is a country that really takes sort of payments modernization efforts quite seriously. It’s a big country. Obviously, any sort of national level initiative is a big project, and they’ve been doing a number of modernizations over the last couple of decades that I can recall. Right now, I think, having not been there for a couple of years, three, four, even, certainly before COVID, what became apparent to me is a couple of things.

The payment side, certainly QR codes are everywhere. All types of payment networks are accepting, promoting the use of QR codes. It’s not just for payments. I mean, I was asked to use QR codes for secure entry to buildings after registering, so they’re being used. You register, they send you a QR code, it comes up on your phone, and you put it into a turnstile reader that says you’re allowed to go into the building now. Also, they are being used, of course, just for advertisements and buying things. When you got in that elevator, in the building, there’d be the little TVs that are up in the elevators to-

Yvette Bohanan:

Oh, yeah.

Elizabeth McQuerry:

Give us some quick news, show an ad, and be like, “You can buy a breakfast from 8:00 AM to noon,” or something. “If you want to order this on your way down, scan this QR code and…”

Yvette Bohanan:

Oh, wow.

Elizabeth McQuerry:

Yeah, so very quick use, time saving activities here. I actually wasn’t able to do that because I’m sure one of the questions you’re going to ask me was, “What’s going on with Pix, and did you get to use it?”

Yvette Bohanan:

Right.

Elizabeth McQuerry:

And in this period of time, Pix has gone from something totally new to something that is totally ingrained in everyday payment life.

Yvette Bohanan:

Interesting, so let me just pause for a second. I have a question about the QR codes before we jump over to Pix. It sounds pretty slick. I mean, I’m thinking back. When you’re saying building registration, I’m remembering the hassle of going into a large, highly secure office complex or something, and the guard, if you’re a guest, actually has to come out, use their badge to let you through the turnstile, all this rigmarole. This sounds very slick, but when it comes to payments on the QR code side, is there a lot of interoperability? Are they standardized on the EMV code, QR code standard? A lot of countries are standardizing in saying, “You can’t have a network-specific QR code. There has to be some level of interoperability and simplicity.” What’s the position there when it comes to payments in QR?

Elizabeth McQuerry:

That’s absolutely right that there is a Brazilian QR code standard, which is based on EMV code, and then any payment network in Brazil, Pix only being one of them, has to use that standard, so it’s above the payment system where this is being organized.

Yvette Bohanan:

All right, and then are you-

Elizabeth McQuerry:

That standard, just for clarity, is put out by the central bank for all payment systems, and it regulates, I’m pretty sure, everything,

Yvette Bohanan:

And it’s not surprising, because when you have a strong central bank, like you do in Brazil, they’re trying to make sure there’s a level playing field. Not just safety and sadness, but they’re actually getting into this sort of, “Let’s keep things competitive at the right place and cooperative at the right levels.”

Elizabeth McQuerry:

Exactly.

Yvette Bohanan:

Yeah. Yeah. All right, so thank you. That’s good. I was really curious about that, so getting back to Pix then. It’s ingrained. So when you say ingrained, tell me. Are you loading up a Pix wallet the minute you step off the plane in order to do things there? What does it really mean?

Elizabeth McQuerry:

Well, I’m sort of bummed to report that, try as I may, and I certainly did. I was unable to get a Pix wallet or a wallet that used Pix. This is interesting, because I actually obtained one of the numbers. It’s actually a taxpayer ID that you need to get, or it’s a form of ID. It’s not my passport, et cetera, or my birth certificate, but you have to have it to get an account, and I thought, “Wow. This is really going to solve everything,” but the things you learn when you try multiple apps are quite interesting, because I tried some bank apps, I tried some digital bank apps, and all of them gave me a little bit of a different experience.

The number that I had obtained for this taxpayer ID was accepted, and I was moved to the next point in the registration process with the digital banks, which I think means the digital banks are very quickly updating with the national registry here. They’re just doing that more quickly, but then I got, if you will, blocked by not having a Brazilian driver’s license or Brazilian other form of ID, even though I was able to share an address of friends that I was staying with, but that just wasn’t sufficient for the registration process, and you really come up against the same thing, that each bank or financial institution is allowed to decide what its full criteria are. I was just never able to get past some of the criteria.

Yvette Bohanan:

Past the starters blocks, as they say.

Elizabeth McQuerry:

Exactly. I can tell you. I’ve got a whole little folder of payment apps that I was not able to really access, but I will also say that I didn’t let that stop me.

Yvette Bohanan:

Okay. My next question is, “Well, then how did you pay for things?” I’m assuming you had to buy dinner somehow, even if it wasn’t through that QR code, but-

Elizabeth McQuerry:

Yeah, absolutely. Cards are widely accepted. That’s not a problem. I, of course, ask everyone that I encountered, friends, coworkers, waiters, what they thought of Pix, had they used it, and I did not get anyone to say anything negative about the user experience. In fact, the number of people who actually just get smiles and happiness when they talk about Pix was really quite interesting, because I think that there is a real understanding that it’s something that the country did, the central bank did, and it’s a point of pride, right? Of course, what’s not to like, as a consumer, about using something that is free and high quality?

Yvette Bohanan:

Right, exactly. I think there’s so few things in life that qualify for those two criteria; free and high quality. Wow, what a concept. When you had payment interactions, it was basically with cards, so international cards like a Visa, MasterCard, MX type thing?

Elizabeth McQuerry:

Yeah.

Yvette Bohanan:

And that all worked out. Are you seeing any indication that there’s maybe a lean with businesses or merchants, in terms of if you’re paying with Pix, it’s free. If you want to use a card, there may be is an extra fee or something attached to that or a discount with Pix or something? Are you witnessing what might be called steering or trying to influence consumers?

Elizabeth McQuerry:

Yeah, so a couple of things that, even though I personally wasn’t able to get a wallet, and fund and pay with Pix, I not only asked people about their usage of it, what do they use it for, but also looked in merchants for signs, and also had the very good fortune of being introduced to one of the new US Faster Payments Council members, Matera, who I went to their office thanks to some nice introductions and they actually spent time walking through the different use cases, the remote use cases of using Pix. They demonstrated just buying with a QR code, buying online, the different ways you can pay, return money, lots of different activities. And they were incredibly, of course, gracious, but also super informed. They were one of the entities. They’re a financial institution software in Brazil, and they were one of the entities that contributed to the Pix forum, the stakeholder engagement that the central bank carried out.

Yvette Bohanan:

Okay. Cool. That’s interesting. And so you mentioned a few things there about the capabilities of Pix, returning funds, and things like that. That’s pretty robust, right? Most of these systems that we would call instant payment systems, fast payment systems, real time retail payments, whatever, they were one directional sort of protocol. You can push money to the receiver, but it sounds like they’re really building this out to be usable across all the domains, across all the use cases. What happens if somebody makes a mistake and sends money to the wrong recipient? Is there a way to back that out elegantly, or is it sort of buyer beware, the way it is in a lot of countries?

Elizabeth McQuerry:

Both, I guess, are really true, and you are really spot on about how robust the ecosystem is in Brazil with Pix for instant payments. I mean, if you wanted to think about what a full ecosystem of payment would look like here, you really have to just look at Brazil, because this is an open loop payment system, so we have all the authorized financial institutions being able to offer it, and of course the largest ones are mandated to offer it in Brazil by regulation. The rest are coming in because it’s a competitive need at this point. And what they have done is, in just two years, they put out a number of use cases from the very beginning.

Rather than sequence them, let’s start with P2P, for example, and maybe work our way up to other use cases. In Brazil, they decided to really sort of put it all out there from the beginning, or a lot. They’re still obviously working on a roadmap of additional enhancements, but what it did was it allowed that sort of stickiness that every network wants, right? So you’re receiving maybe your salary or your government benefit during COVID, that you had some sort of support or someone sends you money using Pix. You get that experience, and it wasn’t that cool. I’d really like to be able to do X with it now, but I need to go out to some other payment option.

All of that was there from the beginning, and Brazil was at the right place to absorb that. It’s not a newly digitizing market, by any means. They weren’t building it up, they were meeting demand. And, of course, I think the most remarkable thing is that in a market where there are lots of robust payment options to choose from, that Pix has grown to where it is in only two years in multiple use cases, and it’s also kind of interesting that you can go on the Central Bank website, look at the statistics for Pix, and they break them out by use case, or at least you know is it a consumer or a business or a government entity paying and receiving because of the way you have to register for an account.

Yvette Bohanan:

I mean, full circle here. Yes.

Elizabeth McQuerry:

Yeah, absolutely. So from a payments’ nerd perspective, looking at consumer-to-business growing to be 20% of very high network volumes in only two years is incredibly remarkable. I mean, Pix is processing over 2 billion payments a month,

Yvette Bohanan:

That’s impressive. That’s impressive by any measure. I always say any FinTech out there would give their right arm and maybe their right leg to have numbers like that in two years, right? But that’s the power of having a central bank. Maybe a little bit of, I want to say they used a lot of education. Clearly they hit the right use cases and experiences for people out of the gates so that it’s not, like you said, “Oh. I can do P2P, but I wish I could go to the store and pay.” It was sort of all there, and with your income going in, you have to make at least one transaction to get it out. So you have a lot of synergy between some savvy choices, is what it sounds like in how they decided to support people. So it could, in theory and possibly really replace physical Boleto at some point. It’s kind of a brass ring right there.

Elizabeth McQuerry:

Yeah. In many regards, Boleto, even though you pay them using an existing payment system, it almost becomes a payment ecosystem of itself, right? So they’ve gone from paper that people received in the mail to being integrated to your smartphone, whether through your bank app or you got your receipt on the email or text, and you can pay it digitally, but if consumers want to transition, they will transition them to Pix, or merchants may decide, “Well, we’re just going to go for Pix, because that’s how people are really paying.”

Yvette Bohanan:

Right, right. And are they using a Pix-branded wallet then, distributed through central bank channels, if you will, or a distribution network with their bank? Let’s say you have a local wallet provider. Are they also moving to Pix rails, and how do we think about closed networks and this open Pix system?

Elizabeth McQuerry:

So one of the rules to use Pix is about branding requirements, so even a financial institution needs to offer a Pix button, right? That you want to pay by Pix as opposed to pay by bank transfer or card, so when you open up your app, it’s one of the options on the homepage. That increases awareness and of course education that you’re using Pix as a consumer, and then you also have to observe those same rules when you’re paying in a wallet that’s not offered by a financial institution, so the digital wallet,

Yvette Bohanan:

Another really smart thing, getting the branding right out of the gate for adoption.

Elizabeth McQuerry:

Yeah. This is such a tough one. You want to bring everyone together. You want to also encourage competition, but if people don’t know how they’re paying and such, that’s also a problem.

Yvette Bohanan:

Yeah, absolutely. Absolutely. It could create a lot of confusion, not just on, “Where is this money coming from and what bank account? How is this actually working?” to “Can I even pay you? Are we on the same system for payment?”, so forth. So getting rid of that complexities.

Elizabeth McQuerry:

There’s a requirement about the placement being on the homepage for payment, and there’s also a requirement about using the Pix brand name, and I’m sure there’s details about color, size, et cetera that I haven’t looked at, but it’s always Pix, right?

Yvette Bohanan:

All right, so going into 2023, top of mind, what are one or two things that people in payments out there should be watching when it comes to Brazil as we go into this next year three of Pix and year. I don’t know what of all of the modernization work that’s been going on. So what should be top of mind?

Elizabeth McQuerry:

Brazil has got this other parallel, I think, modernization, or maybe that’s not the right word, but open banking is going on at the same time, right? And it’s a separate initiative from Pix, but they’re quite complimentary at the same time, and you’re building up a very successful ecosystem; people paying their taxes with Pix, people paying each other. It is just perhaps even a very, very common way to pay, and people ask, “Is this going to replace cards?” In Brazil, we see some evidence of how that will play out, and it is being widely substituted for debit cards, not for credit, so we see some indicators there.

Yvette Bohanan:

That makes a lot of sense, actually.

Elizabeth McQuerry:

Yeah. It’s this cash substitute, right? So digital payment is clearly growing. I’m going to have a little more coffee as the interview goes along, I hope. But a concern, no matter how incipient it is really fraud, and Brazil’s success means that there’s also fraudsters looking to take advantage of the system. They don’t have a problem with sort of fake accounts or synthetic accounts that we sometimes have as taking other credentials because of the way you have to register to have an account. I mean, evidence that I wasn’t able to get one, not that I thought it would be fake, but-

Yvette Bohanan:

There’s some controls there under the hood, for sure.

Elizabeth McQuerry:

Exactly, but there are also other ways that people and the payment system are being taken advantage of, and Pix has committed to working on ways to mitigate those in 2023. And so I think that will be a big focus, and that’s actually the sort of price of success, right?

Yvette Bohanan:

Right, right. The fraudsters never go away. The rings are very sophisticated, and you have everything from just people demanding to use someone’s cell phone and transfer money out the fraudster’s account or the criminal’s account, to more sophisticated phishing attacks, probably, and those are the hardest to deal with in some cases.

Elizabeth McQuerry:

I didn’t mean to sort of just gloss over a question you asked, which is really related to refunds or return of money on Pix. There is an actual feature or use case to return funds like, “Oh, you sent me money, and I really didn’t think you owed me $100. It was only $10, so I could send you back $90 easily if I wanted to.” That was one of the things that was quickly, easily demonstrated by our colleagues at Matera. Also, there is a special return mechanism, it’s called, for return of funds that are fraudulent. I can’t tell you how widely used it is, because I actually don’t know, but that would be how you return funds if they could be returned, but that’s the real problem, right? The speed at which you can move the funds to another destination.

Yvette Bohanan:

Right, right. And I think we’re going to see that evolution across the globe. If these systems really take off in a country, there has to be some reverse gear on the car, there has to be some more elegant way. You can’t have something that’s so digital and soak fast, and then have some kind of manual “Call me. You’ll get it back in 10 days” process. On the flip side, you have to figure out how to do this in a more elegant and in realtime way, forwards and backwards.

Elizabeth McQuerry:

And there will probably be some rules that need to support that, right? So suspension of funds, pricing of funds as they go from account to account. What are the measures that we can take to certainly reduce the impact of potential frauds here? I have to say potential, because there needs to be some sort of investigation, right?

Yvette Bohanan:

Right.

Elizabeth McQuerry:

It’s not something that happens in an instant.

Yvette Bohanan:

Right, exactly. But how do you get something that’s reasonable? Yeah, exactly.

Elizabeth McQuerry:

Yeah.

Yvette Bohanan:

So lots of evolution as we continue, so I’m going to be watching this closely and, hopefully as things progress through the year, we’ll have you back on maybe with some guests to talk about new developments and-

Elizabeth McQuerry:

Yeah, absolutely.

Yvette Bohanan:

-in the region. All right, so thank you, Elizabeth. It’s always a pleasure to catch up with you. We don’t do it enough, and thank you everyone for listening. We hope all is well. This is Yvette Bohanan and Elizabeth McQuerry at Glenbrook. Take care, and until next time, be safe and do good work.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Recent Payment Views

2023: A Big Year for Regulation in the US?

2023: A Big Year for Regulation in the US?

As we dive into the new year, we at Glenbrook reflect on the key themes and learnings within payments from 2022 and assess what we believe will emerge as key trends in 2023. My colleague Chris Uriarte recently shared his 8 Payments and Fintech trends for 2023 on...

read more
Decoupled Debit: How Fintechs Profited  from Durbin

Decoupled Debit: How Fintechs Profited from Durbin

This Payments Views post was jointly authored by Neel Saunshi and Andrew Liang If you have followed the Durbin Amendment since its 2011 implementation, you have seen stakeholders adapt in different ways. Consumers saw their debit rewards programs disappear. Large...

read more
Payments Partners: The Identity Industry

Payments Partners: The Identity Industry

Time to Read: 9 minutes The problem of knowing who to trust on an insecure, anonymous network has concerned me since I founded an ISP in 1995. With thousands of subscribers, it was the first time I confronted bad online behavior. As a payments geek, I’ve seen plenty...

read more
The Payments Playbook for Challenging Churn

The Payments Playbook for Challenging Churn

By: Justin Pituch and Drew Edmond Time to Read: 7 minutes If you read Apple’s Q3 earnings report, you may have noticed that the company’s Services business has grown to $19 billion in quarterly revenue. That’s a staggering number, and it represents a complex recurring...

read more

Glenbrook Payments Boot Camp®

Register for the next Glenbrook Payments Boot Camp®

An intensive and comprehensive overview of the payments industry.

Train your Team

Customized, private Payments Boot Camps tailored to meet your team’s unique needs.

OnDemand Modules

Recorded, one-hour videos covering a broad array of payments concepts.

Glenbrook Press

Comprehensive books that detail the systems and innovations shaping the payments industry.

Launch, improve & grow your payments business