After the creation of a Brazilian instantaneous payment method earlier this year (“PIX”), on November 16, 2020, the Central Bank of Brazil (“BCB”) officially launched its new digital transfer and payment platform. The purpose of PIX is to make it easier for customers to transact in the digital banking environment.

This payment method (pursuant to which funds are transferred between accounts in a matter of seconds) is intended to allow for a fast and safe transfer of funds at any time of day. A PIX transfer can be made from a number of different types of accounts, including current/checking accounts, savings accounts, or prepaid payment accounts.

In addition to increasing the speed at which payments or funds transfers are made and received, PIX has the potential to:

• provide for an efficient and competitive payment and fund transfer system;
• lower the cost of money transfers and provide for increased security;
• encourage the modernization of the retail payments market; and
• promote financial inclusion as well as competition in the financial sector.

An additional benefit of the system is that people who were previously outside the Brazilian banking system will now have an opportunity to access the benefits of digital financial services. This means that millions of users not having bank accounts will be empowered to make timely payments on loans, bills and transfer funds to others without having to rely on cash or checks.

PIX will be officially launched and widely available to all individuals or businesses having a bank account, savings account or prepaid payment account at one of the 762 institutions approved by the BCB to provide payments using the PIX method. The BCB has published guidance and manuals on a number of related topics such as the use of the system and security matters. In addition, the BCB is expected to issue further guidance, including with respect to dispute resolution related to transactions executed through the PIX system.

The launch of PIX promises to significantly change Brazil’s banking practices by enabling payment transfers 24/7. The debut of PIX will mean new players in the payment services business, including FinTechs and other banking institutions that can offer services and compete directly with larger financial services institutions.

As with any new payment method, tool, or platform, the security of the system is critical. While the BCB has indicated that the system is secure, the PIX system could be a target for fraud through phishing and other cyber-attacks.

According to the BCB, PIX will follow the same safety protocols already utilized by the Brazilian National Financial System (SFN), which are already used for wire transfers, such as Electronic Available Transfer (TEDs) and credit orders (DOCs). Further, PIX transactions will be protected by cryptography and authentication technology, together with security protocols utilized by the participating financial institutions such as fingerprint identification, iris or facial recognition, and the use of personal identification numbers (PINs).

On September 18, 2020, Brazil’s General Data Protection Law (“LGPD”) became effective, which has implications for companies of any nature that hold personal data, including handling personal data for PIX transactions. Financial institutions and FinTechs utilizing the system will need to be proactive in educating their customers and inexperienced unbanked citizens about fraud risks to help them avoid falling victim to scams. PIX providers that commit to building trust and investing in strong anti-fraud solutions will be able to distinguish themselves from their competitors more effectively.

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