The Central Bank of Brazil launched instant payment system Pix in November 2020 in partnership with private banks. Less than two years later, Pix is at nearly $200 billion in total payment volume per month (BRS 986 billion), with more transactions than credit cards, and tied with cash in daily frequency of use according to a survey by venture capital firm Atlantico and Atlas Intel.
It is a golden accomplishment when you consider that cash accounts for eight of every ten payments made across Latin America, says Verb’s new digital wallet report. Brazil was no exception but is now transforming quickly thanks to Pix and a host of innovative fintech startups including PicPay and Nubank.
Other countries used technology to handle its cash addiction. India’s digital payment system UPI took four years to reach one billion transactions per month, which Pix reached only eleven months after launch—in a country with 15 percent the population of India. Over half of Brazilians now use Pix an average of nine times per month, compared to four times per month for UPI.
Mario Gabriele of The Generalist said last week that Zelle, the digital payment system of U.S. banks, had double the volume of the popular Venmo app at $490 billion in 2021, a figure Pix amply exceeded just last quarter.
A key difference is that business payments made up 62 percent of Pix volume in August, while U.S. banks place limits as low as $5,000 for Zelle business payments. Wire transfers don’t have those limits but pay fees between $1 and $30 depending on speed. Perhaps the Federal Reserve should also “make a Pix” if it wants banks to move faster.
Federal Reserve: We’re kind of busy now
The Federal Reserve has increased interest rates so fast that U.S. banks are making loads of extra money while customers wise up and ask for more to hand out their savings. JP Morgan Chase CEO Jamie Dimon told analysts to think nothing of the estimated $19 billion in net interest income his bank got last quarter, reports The Wall Street Journal, as competition for deposits will intensify for sure.
Dimon must have been thinking of Apple, which the day before announced it will offer high-yield savings accounts to Apple Card users in partnership with Goldman Sachs. Apple customers will be able to use the new accounts to deposit their “Daily Cash,” the 2 or 3 percent reward they get back on their Apple Card purchases. Apple and Goldman have not yet confirmed the rate they will pay on those deposits.
They wish they had cash
TechCrunch reports that fintech startups raised $63.5 billion worldwide in the first three quarters of 2022, the top venture capital category with one in every six dollars invested so far this year. Yet that is a sharp decline from a massive 2021 for VC investment and for fintech startups, prompting lower valuations, a search for profits, and layoffs.
Of note, despite years of massive investment in the sector, 1.7 billion people worldwide are still excluded from formal financial services. According to a new survey of 18,000 low-income people by research firm 60 decibels, their first access to credit is through microfinance, or the idea that providing loans to poor microentrepreneurs will enable them to pull themselves out of poverty.
A successful practice of microfinance organizations like nonprofit Pro Mujer, a Verb customer, is group lending, where a dozen or so women back each other up in case one of them cannot make a payment. Their needs go beyond cash, and these groups are a first step to inclusion for those who have nothing but each other.