The Brazilian Central Bank (BC) is introducing instant payments next year as part of a number of measures geared at increasing market attractiveness and growth of the fintech segment.
Under the current system, in order to buy goods or services Brazilians need to use cards, cash or the boleto - a barcoded payment slip referring to a purchase, which can be settled at payment points such as lottery shops, supermarkets or any bank branch.
Cost of payment services currently ranges between 2.30 reais ($0.53) to 143.20 reais ($38.20), according to BC data. Same-day money transfers are only credited when transactions occur on weekdays between 6:30AM and 5PM.
The idea under the new model is to allow real-time, 24/7 payments through QR Codes and therefore allow receipt of payments without the need for equipment such as point of sale terminals. This would mean speed and lower costs to consumers as well as small businesses.
A working group comprising of BC and industry representatives will define the architecture of the service and the details of the new payments ecosystem by year-end. Instant settlements are expected to be under a phased approach from next year and be fully operational by 2021.
By introducing instant payments, the Central Bank also expects to attract the interest of fintechs focused on money transfers. This will in turn bring more market competition, says the BC, as well as more choices to consumers at lower prices.
Unlocking foreign investments
The Central Bank has also released a decree on October 30 that allows foreign investment of up to 100 percent into credit fintechs. Since May, such ventures can be defined as direct credit or peer-to-peer lending entities.
Despite having a much more limited scope than a traditional financial institution, these new ventures are part of the financial system, so foreign investment relied on the interest of the government and also involved editing a presidential decree.
Such bureaucracy restricted the investment of foreign venture capital firms until now. Under the new decree, credit fintechs can attract external investment as long as they are authorized to operate by the BC.
When announcing the new rules, the Brazilian Central Bank stated that this is part of a new agenda focused on "stimulating the market entry of new institutions, as well as competition and the process of innovation."