Comment by mzitelli
2 months ago
Brazil central bank introduced Pix a few years ago. It took over the country as the public basic infrastructure for money transfer. Totally free and instantaneous transactions between people and companies, available to all banks.
Then, just last week, the US presidency launched an investigation considering Pix an unfair trade practice against the US.
Actions like that may show the current direction of the US government is aligned on preserving status quo. But still, I wonder how impactful a public digital infrastructure for the dollar would be.
I got in this thread with the expectation of seeing a comment like yours, so thank you for that.
I think what worries the U.S. more is the likelihood of Pix spreading around the world. It’s such a great public program that I believe many countries will eventually adopt it, or adopt some version of it. In fact, AFAIK some places already have it, like Thailand and Malaysia.
Consumers like it because it is widely available and free, companies like it doubly so, and even governments like it because it helps to combat tax evasion and fraud.
Right now, the only thing that makes credit cards a better proposition is being able to pay without having enough money in the bank, and maybe enjoying greater protection from fraudulent merchants. But I believe even that will change in the future, to the benefit of Pix-like systems.
> AFAIK some places already have it, like Thailand and Malaysia.
Also Vietnam (Napas247), Singapore (PayNow), Philippines (QR Ph), Japan (lots different systems), China (WeChat/Alipay, I think?), Russia (SBP), Belarus (ERIP, in a sense), and the whole of EU (SEPA transfers).
One problem is, most of them don’t really work for you if you’re a foreigner. Moreta (YC S24) is doing something in SEA, and I’ve seen another service for visitors in India, but I think exchange rates wouldn’t be too good (compared to something like Wise, maybe on par with regular banks though).
https://moretapay.com/, https://ale.sh/r/moreta (affiliate link)
https://wise.com/, https://ale.sh/r/wise (affiliate link)
The EU is also now pushing WERO
https://en.wikipedia.org/wiki/Wero_(payment)
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India has UPI (Universal Payment Interface) for instant free transfers. They are working with Singapore to integrate their payment systems so that people will be able to send remittances instantly across the countries.
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> Right now, the only thing that makes credit cards a better proposition is being able to pay without having enough money in the bank, and maybe enjoying greater protection from fraudulent merchants.
This is the entire value proposition of credit cards and is what undergirds the issuer (bank) justification for interest rates assessed. To be able to defer card-holder immediate payment for some period of time and/or to put the onus of proof-of-purchase on the merchant instead of the card holder.
The last point is non-trivial when considering debit or debit-like networks result in funds being transferred during settlement (often performed daily), thus making the customer responsible for proving they did not perform the transaction post hoc.
I am in Thailand. Fraud is a much smaller issue because it’s a push-based system. You cannot withdrawal from someone else’s account just by knowing the number, unlike with credit cards.
What about fighting charges? In the US, if I flag a charge on my credit card it's immediately cancelled and they deal with it.
How does that work?
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> Right now, the only thing that makes credit cards a better proposition is being able to pay without having enough money in the bank
It will not take long. Banks are already offering products with credit on top of the Pix. Furthermore, contactless Pix is now available in Android phones. If we look from the financial and usability aspects, Pix will continue eating the credit card market share.
I didn't know Thailand and Malaysia had similar systems, though. I hope the example spreads! Creating a competitive infrastructure and product is an interesting way to deal with monopolies.
About half of the world population has access to some sort of QR based payment system nowadays.
India has UPI, China has Ali and Wechat pay. Almost everyone in these two countries can go weeks without having to use cash.
In South East Asia, Vietnam is leading QR payments. I live in Ha Noi, and I only carry VND equivalent of $15-20 with me, and it sits in the wallet for ages. Everything from gas stations to restaurants to street vendors to even paying taxes, you do it from a QR code. There is no wallet, the money is directly debited from the account.
Thailand, Singapore, and Indonesia have similar systems. In Indonesia, a couple of "super apps" had their own wallets, but merged with QRIS a few years back, a lot of Indonesian people can now pay with QR codes, even across wallets and bank accounts.
South America and Asia has already started to replace card payments with the QR payments. Rightfully so.
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I believe the Singapore, Malaysia and Thailand ones are linked too, I noticed last time I went over to Malaysia that they could accept the Singapore PayNow payments too.
>" the only thing that makes credit cards a better proposition is being able to pay without having enough money in the bank"
I am not sure it is a better proposition if one looks at staggering amounts of debt caused by credit cards
You don’t want to spend money you don’t have? Congrats, your credit score is trash and now you can’t rent a house (let alone buy).
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Pix, UPI, etc are nationally silo'd and have little risk of spreading around the world. They took over their respective countries because they were government backed and mandatory.
The US has its own version of this: government backed, 24/7 instant settlement payment rails (called FedNow). It released in 2023 but adoption is slow because it's not mandatory. Banks are especially slow to support "Requests for payments", which might compete with card networks for retail purchases.
It's the banks, not Visa / Mastercard, that make the most off credit card fees. Visa / Mastercard take .1-.2%, the bank takes ~2%.
The other unique bit about the US is we have uniquely strong consumer protection laws and a uniquely large amount of fraud. Irreversible payment rails are a nightmare for consumers who are used to chargebacks being built in to the payment rail, and banks are skeptical of exposing such rails to consumers because most of the time the banks are required to make good when the customer is defrauded.
UPI & RuPay are not mandatory, they are completely optional.
Citizens and travelers in India can pay by cash, card, UPI or NetBanking to make offline or online payments. A new or existing customer or a Bank can randomly get (and can anytime request for a replacement card) to Bank to get the ATM/Debit card as RuPay, Visa or MasterCard card. So RuPay card is optional too.
But nevertheless, the technology stacks behind UPI and RuPay have been built to be so versatile, scalable and robust that they now account for 85%+ debit & payment transactions in the nation! India is rapidly heading towards a cashless economy!
Due to the interoperability, scalability and resilience in the technology stacks for UPI & RuPay, these brilliant solutions are now being sought after by other nations, who are eager to buy and leverage these tech stocks to implement their own branded payments systems that will replace Visa, MasterCard, Amex, etc. in those nations.
e.g., UAE has tied up with NCPI (Indian government organisation that implemented and manages UPI & RuPay) as a tech license deal and UAE has already started its own implementation of RuPay, which it has branded as Jaywan. So the Jaywan Debit cards are alternatives to debit cards from Visa, MasterCard, Amex, etc. in the UAE.
The other unique bit about the US is we have uniquely strong consumer protection laws and a uniquely large amount of fraud.
This has nothing to do with instant payment. Lets say $1000 is lost from your checking account due to fraud then is it covered by visa or mastercard? consumer protection there is different.
With SEPA or UPI it is irreversible but it is the same like you ACH transfer. If you do a mistake then it is irreversible.
Some people here talk about Amex, VISA or mastercard giving free damage insurance on purchase of consumer items like phone etc. That is not consumer protection. That is more like one gets this free insurance for paying yearly fees or maintaining account.
Another reason for fraud is the use of magnetic stripe based card readers.
> The other unique bit about the US is we have uniquely strong consumer protection laws and a uniquely large amount of fraud
I'd certainly dispute the former part. Strong, in a subset of cases. But chargebacks are still, ultimately, a he-said-she-said a lot of the time, and it's very easy to find abuses of it. Not to mention, merchants who blanket ban and revoke access to purchases because of even legitimate chargebacks. There's little recourse for that other than arbitration, generally, if that.
> Right now, the only thing that makes credit cards a better proposition is being able to pay without having enough money in the bank, and maybe enjoying greater protection from fraudulent merchants. But I believe even that will change in the future, to the benefit of Pix-like systems.
Does Pix offer something like credit card rewards? I understand that you ultimately pay for this through fees that make prices slightly higher, but it is still an incentive to use credit cards over other payment methods.
> Does Pix offer something like credit card rewards? I understand that you ultimately pay for this through fees that make prices slightly higher, but it is still an incentive to use credit cards over other payment methods.
No, because it's free, there is no high transaction fee to pay for those rewards. And that's ultimately better.
> Right now, the only thing that makes credit cards a better proposition is being able to pay without having enough money in the bank, and maybe enjoying greater protection from fraudulent merchants.
Rewards is another big one and the reason I personally prefer to use credit cards where possible.
Rewards exist because credit card transaction fees to merchants are very high, though. Europe put a limit on those fees and no credit card rewards exist here.
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India has UPI. China has something. It is only a good thing that this should spread everywhere.
Fairly sure QR code based payment systems are pretty common outside of the western world since China popularized it. You cam even hook your credit card up to something like Alipay and get by with minimal extra fees.
Haven’t the Eurozone and presumably many other places had this for quite some time now? Or is Pi. somehow better than SEPA?
There is UPI too in India, pix also sounds decent! Pardon me but I think pix is open source too which is nice too !
In Argentina we have Mercado Pago which is basically this.
It is not the same. Mercado Pago is a product from Mercado Livre and charges at least 0.8% per transaction.
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My understanding is that Pix took over because the Brazilian gov did transfer payments during covid and the (only?) way to get those payments was via Pix. So it forced everyone to start using it. And once people had more familiarity with Pix, merchants started pushing for it because it charges ACH level fees.
The chargeback system (MED) is only so-so right now, but expected to get better.
There is a lot to like about Pix, but the spec is extremely complicated and hard to implement.
I started using Pix, because it's the best way to do business with Chinese ecommerce sites.
You don't have to give your credit card details and refunds go straight back to your account.
In fact, it really impressed me that Aliexpress got it working before many Brazilian sites.
If you use an intermediary, implementation is usually very simple and straightforward. The biggest challenge is becoming a direct participant—that is, communicating directly with the central bank. In this case, you need to enter the regulatory framework and become a payment institution.
There are plenty of companies in Brazil that offer PIX payments to foreign e-shops. Valve has been accepting PIX for some time now, for example.
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Pix blew other kinds of bank transfer out of the water. TED, DOC, Boleto, were slow and expensive. Pix is instant, free for most people, and just works.
No, the Central Bank of Brazil did not force any person to start using Pix.
Also, care to elaborate why you think the spec is complicated and hard to implement?
Coerce is likely a better word.
Pix and OpenFinance are extremely chatty APIs with a ton of rules. Being a merchant using the ecosystem is not that bad, but trying to be a participant in the network is complicated.
By the way, for those that want more context on Pix a good place to start is this BIS Bulletin: https://www.bis.org/publ/bisbull52.pdf
It is total corruption through Visa/MC of our political system in a way that people really do not understand. That is who and what would be affected. You can’t even get anyone to propose a bill to create a digital payment processing capacity just like how the government issues currency. It has been the hijacking and takeover of the most fundamental task of the government, issuing currency.
Does the Central Bank of Brazil publish data on the cost of running the network and how it is funded? Or is there a hidden tax that eventually makes its way to the customer in order to keep it going? Nothing is totally free. Who pays for the infrastructure costs, not to mention the legion of humans that it surely takes to maintain the network? Pretty sure that no matter what is published publicly, someone is paying for it, and that cost is being passed around the logistics chain and ends up on the prices of the products you buy. Sure, it may be much cheaper, but it's not totally free.
It costs up to ~$9m per year, processing 63 billion transactions per year: https://oglobo.globo.com/economia/noticia/2024/10/03/bc-gast...
Banks pay a small fee (less than a cent) per batch of transactions.
Pix is free for natural persons and individual entrepreneurs. For businesses, receiving is free, but they pay a fee to send money[0], this can vary from one institution to another.
[0] https://www.contabilizei.com.br/contabilizei-responde/taxa-p...
If the central bank offers it, it would be the equivalent to cash. Cash is also expensive to maintain and issue. Do you ask all the same questions as who pays for cash?
I'd like to see a system like that that also integrates taxes. That is, it tracks total income for each payee each year and deducts taxes based on the appropriate tax bracket. It should also support sales tax and state income tax. That way, all that you need to do is appropriately mark the transactions and tax compliance is done. You could even mark business expenses in it and have deductions automatically processed.
Someone could lie about the nature of their transactions, but that's called tax fraud and it's already possible and we already have mechanisms to deal with that.
Can anyone please steel man the opposition argument for Pix?
You can’t create a moat to skim 3% of the economy as a for profit venture.
The brazilian government can choose to start taxing every single pix transaction at any time. Due to the electronic and centralized nature of the system, such taxes would be utterly inescapable. The only thing stopping them is the sheer unpopularity of such an action.
It's already being used for data cross referencing, tax collection and investigation purposes. There are plans to implement into these payment systems pretty much everything that cryptocurrency maximalists warned us about. It's a convenient system but at the same time quite dystopian.
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FWIW credit/debit card transaction fees are capped in the EU/SEPA, to 0.3% for credit and 0.2% for debit. 3% is absurd.
Minor annoyance, but just a few limitations and restrictions, after all you need a smartphone and internet connection.
So.. when paying in a store, you need to open your banking app in your smartphone, and if you’re in an area with bad cellular connection (inside a few buildings or in a countryside), you need to connect to the store wifi. Only then you can scan the store QR code and make the payment.
So a single payment can easily take a few minutes, as opposed to a contactless card payment which takes a few seconds.
My main issue with pix is the even more reliance on a smartphone for our day to day life.
From the comments it seems that it is essentially the same as using cash as far as no buyer protection if you want to challenge a charge like you can with a credit card.
I'm not a big fan of crypto but I've always wondered why the US wouldn't want to create a highly secure private coin that's pegged to the dollar. I mean you put a very small transaction fee on it (can be far less than Visa's 2%) and you're suddenly generating revenue from tons of global transactions, benefiting from the status of the dollar being the global currency. You even get to "tax" illegal transactions, and as a consumption "tax". It would only work if it was highly private (effectively like cash) as no one else wants to be handing all that data over but it still sounds like it would be a big win to many parties (well not the authoritarians? Maybe?). Everyone will be "banked", you get digital payments everywhere, and you even probably reinforce the reliance on the US dollar. Is the demand for control so much greater than the demand for money combined with providing a public good? I know there's still challenges to resolve but a guy can dream, right?
You're describing a CBDC, not a coin. Why isn't it being done? Because commercial banks are vehemently against that. The current administration in particular will never go against the big banks.
If that's the word, then yes. Thanks, I'll update my terminology.
As for the government, I'm sorry, I thought I acknowledged that point. Though I also don't think we should just take it and give up.
Because highly secure coin wouldn't allow the government to track money.
I firmly believe that the Federal Agencies do not fight bitcoin exactly because it is so easily tracked.
My bad, I thought I acknowledged that issue
> Is the demand for control so much greater than the demand for money combined with providing a public good?
Yes. Also the current administration is hostile to public goods as a concept.
The politics around this is very weird. The US is basically regularizing "stablecoins" as electronic dollar-proxies while banning central bank digital currencies which the Fed has never planned to do. Basically to ensure all the profit and privacy risks stay in the private sector.
Because nobody needs a cryptocurrency when you have a centralized trusted broker.
Another commenter pointed out that the correct term for what I'm suggesting is a CBDC, which, yes, uses a centralized trusted broker. Which I personally don't care if it is a centralized ledger or a distributed ledger, as long as it is actually private (a-la zcash ZKP or something similar)
So like Circle's USDC Circle Payments Network?
Is Circle private? Their whitepaper is very lacking in that department...
> I wonder how impactful a public digital infrastructure for the dollar would be.
The future digital dollar is being quietly sabotaged as the current administration realizes that crypto isn't just capable of anonymous bribery, it's the ideal medium for it.
People don’t really believe me when I say I went to the U.S. and had to sing the national anthem every day in class.
There’s no other place that protects its companies so fiercely, meritocracy be damned.
Great for investors though!
American corporations have never been shy about using the might of the US government to protect their own interests. USTR's "notorious market reports" is a nice example. "Our stakeholders" want this, "our stakeholders" are concerned about that. It's a huge list sovereign nations get onto when american corporations don't like them. They put Canada on that list at some point.
I fully expected Trump to attempt to leverage the Bolsonaro trial into economic advantage but it was pretty surprising to see him take issue with pix of all things.
FedNow is still a thing, at least for now.
How do I use FedNow to buy things from merchants?
it's important to note that Pix took over Brazil because it was mandatory. The US Federal Reserve built equivalent infra: FedNow, as of 2023, is the rails for instant settling, $.04 bank transfers. But adoption is meh
It's totally unfair that they don't get a cut from other people's business. /s
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