Brazil’s Pix First Cross-Border Connections

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    An idea born out of improvisation inspired fintech companies to connect the dots to offer the country’s instant payment scheme in its South American neighbors, Argentina and Uruguay.

    How Brazilians pay with Pix in Argentina and Uruguay

    Sulivan Rocha

    Sr. Analyst

    Contact the author

    The idea was born out of improvisation, with Argentinian shopkeepers “borrowing” accounts from Brazilian partners or friends to receive payments from Brazilian tourists wanting to pay for purchases in Buenos Aires through Pix, Brazil’s instant payment system. In mid-2023, some fintech companies operating in South America found ways to offer this possibility through official channels.

    One of the platforms that first saw the idea as a business opportunity was Argentinian KamiPay. Through its platform, Brazilians can make payments using a QR Code. The amount is debited in reais from the customers’ accounts, while the merchant in Argentina receives it in pesos or “digital dollars,” which has a price similar to the “blue dollar,” the black-market currency exchange rate that is lower than the “MEP dollar,” traditionally used in credit card purchases. This kind of arrangement makes sense for everybody involved.

    The advantages of using Pix

    For Brazilians, paying with Pix is cheaper and more convenient than carrying tons of devaluated peso bills in their wallets or paying the fees of card transactions. As with other international operations, the conversion in KamiPay’s transaction also happens on the Brazilian side, which means Brazilian customers pay an international transactions tax (IOF) of 0.38 percent but avoid the higher tax for debit and credit card transactions of 5.38 percent, not to mention bank fees.

    For Argentinian businesses, receiving in reais or “digital dollars” helps them protect their earnings from inflation, which reached 287.9 percent in the 12 months through March 2024. Merchants also receive payments faster, in seconds, than from card acquirers, which take at least ten business days. This is possible because the fintech uses blockchain to settle payments to merchants outside Brazil. KamiPay said recently that over 45,000 Brazilians have used its solution in Argentina1, available for about 600 Argentinian businesses.

    Brazilian PagBrasil is another fintech company connecting South American businesses to Pix. It does that through an application that transforms the merchants’ smartphone into a POS terminal. In this operation, Brazilian consumers also pay an IOF of 0.38 percent and have the purchase value converted instantly to reais. Merchants, in turn, can receive their payments in US dollars or euros. The company does not inform, however, which exchange rate it uses to convert the purchase from pesos to reais or dollars. In Uruguay, the company has partnered with a local fintech called Plexo. PagBrasil wants to take its solution also to Argentina, Chile, Mexico and Portugal.

    Another player developing a cross-border arrangement for Brazilian tourists is US-based Fiserv. Its solution is available to commercial establishments that use POS terminals and systems from Clover, one of Fiserv’s brands. These transactions, however, are subject to the IOF exchange rate of 1.1 percent, and conversions follow the MEP dollar – one of the several exchange rates for the U.S. dollar in Argentina, which is not so favorable to merchants. Currently available in Argentina, Fiserv is studying how to take its solution to the US, Mexico and Canada between the end of this year and the beginning of 20252. The business opportunity behind such solutions is indeed enormous. Allowing Brazilians to use their favorite domestic payment method abroad could be a game changer for countries that frequently welcome Brazilian tourists. Brazilians’ cross-border spending in the United States reached BRL 24.9 billion (approximately USD 5 billion) last year, about 38% of all the volume spent by Brazilians abroad. As for Argentina and Uruguay, both rely on Brazilian travelers as an important source of income. In 2023, Argentina received almost 1.4 million Brazilians – the second-largest volume of visitors after Uruguayans. Uruguay, in turn, was the destination for 593,058 Brazilian tourists last year.

    Pix is about to surpass 150 million users in 2024. Central Bank of Brazil.

    Pix International, well, not really

    Despite using the term “Pix International” to refer to their solutions, these companies are far from having developed what the Brazilian Central Bank itself plans for Pix’s cross-border scheme. The monetary authority is still in its early days for any purely cross-border solution, i.e. an international scheme that integrates systems allowing real-time transactions in different currencies and between accounts in different jurisdictions3 – something very complex, which would involve the establishment of standards, rules, and sources of liquidity between different countries.

    Pix International is not among the priorities in the system’s roadmap. In fact, the Central Bank is currently going through an HR crisis4, with public servants demanding a pay raise and better working conditions. The last Pix Forum, a meeting where the monetary authority shares the latest operational and regulatory developments of the system with all stakeholders, was supposed to be held in March, but it didn’t happen. The only solutions currently on Pix’s roadmap are Automatic Pix, the system’s recurring payments solution set to be launched in October this year, and MED 2.0, a security solution for triangulating fraudulent transactions.

    Nevertheless, in December 2023, the Central Bank chairman, Roberto Campos Neto, mentioned during a G20 meeting5 that the regulator had started working with the Central Bank of Italy to define a set of basic rules for international payments. Integrating central banks through the Bank for International Settlements (BIS) would eventually create a global system of instant payments. As Pix is a reference when it comes to real-time payment schemes, it could be used as a basis for such a system.

    Next Steps

    More fintech companies are interested in building international solutions based on Brazil’s instant payment Pix. If you want to know more about the scheme, how these arrangements are being built, and what kind of opportunities they can offer, contact us!

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    Sulivan Rocha
    Sulivan Rocha

    Sulivan Rocha is an Analyst specializing in the Brazilian payment landscape, with expertise in payments acceptance, fintechs, digital banking, payment processing, cross-border transactions, real-time payments, and e-commerce acceptance.