IN NOVEMBER 2020 the Central Bank of Brazil (BCB) launched Pix, a digital payment system, into the teeth of the covid-19 pandemic. Avoiding physical contact at a time when that was much desired, instantaneous, free and easy-to-use, Pix took off. Users need the recipient’s national ID number, phone number or a QR code to move money. By 2024 (see chart) it had become Brazil’s most popular payment technology, displacing both cash and cards. The number of transactions increased from 9bn in 2021 to 63bn in 2024, moving 26trn reais ($4.5trn). No country has adopted such a system faster. 

The widespread use of a frictionless, cheap payment platform has spurred competition in Brazil’s stale banking sector. It is also fostering further innovation. Pix provides the bedrock on which the BCB is building Drex, a digital version of the real, which it plans to launch after tests, due to finish this year. It would then be one of just a handful of central banks to have issued a digital currency.

Renato Gomes, one of the eight directors of the BCB, says Pix is fast supplanting cash payments. Cash withdrawals in Brazil are down by nearly 40% from their peak. Pix is expected to overtake credit cards to become the primary method of making online purchases this year. The central bank is constantly adding features to facilitate payments in an ever wider array of scenarios. In February Pix began rolling out contactless payments using smartphones. From June users will be able to use Pix to make recurring payments, such as those for utility bills. All this means more and more money flowing through the banks and retailers’ accounts. Mr Gomes says Pix’s mass adoption may well have boosted productivity. Perhaps coincidentally, Brazil’s GDP growth has beaten expectations for the past three years in a row. 

Pix has also helped shake up Brazil’s banks, which used to be highly concentrated. In 2018 six of them accounted for 82% of assets and 86% of loans. Thanks to Pix, smaller firms without resources to open branches or maintain cash machines can now compete. Perhaps the best known of these is NuBank. In 2019 the digital bank, which does not charge users to open an account, had 17m customers in Brazil. In 2024 it surpassed 102m (with another 12m in Mexico and Colombia), becoming the world’s largest digital bank outside China. It has moved into loans, too.

Pix is free to consumers and cheap for merchants, with fees of 0.22% on average. The fees banks charge to merchants for processing card payments are some ten times higher. Competition is forcing them to cut these to attract customers. Many retailers offer discounts for shoppers who pay with Pix rather than cards or cash.

Old-fashioned banks have benefited a bit, as Pix has let them shut down costly, under-used branches. Pix requires users to have a bank account, so its adoption means more customers to whom loans and other services may be sold. But most of this growth has gone to NuBank and its ilk.

Pix was not the first instant-payment method promoted by a central bank in an emerging country. That prize goes to India’s Unified Payments Interface (UPI), which was launched in 2016. CoDi, Mexico’s version of Pix, got going in 2019. Yet Pix has been adopted much faster than either UPI or CoDi. Other countries are following Brazil’s lead. In February Colombia introduced an instant-payment system, developed in partnership with one of the fintech companies that worked on Pix. 

But unlike India, where UPI is run by an industry body, Pix is managed entirely by the BCB. Though it consulted with financial institutions during development, the BCB alone runs Pix’s infrastructure and controls the encrypted database that stores all transactions. Virtually all big banks in Brazil were forced to start using Pix when it was launched.

This concentration of power in a central bank is unusual, and has led to criticism. “Now we live in a democracy, but imagine if this existed under an autocracy and all your information was available to the government,” says the head of one prominent fintech company. He thinks citizens in richer countries would balk at the government having Pix’s level of access to all financial transactions. Also, if the system is ever hacked or breaks down, the fallout would be greater than if a single bank were attacked. 

Brazilians seem unbothered. Pix is going global, with payment processors across Latin America starting to accept it. Brazil’s central bankers are talking to countries that host large numbers of Brazilian immigrants to allow remittances to be sent through Pix. That could undercut money-transfer companies that charge high fees. 

Pix’s spread has also made it easier for the BCB to launch its digital real, Drex. Doing so requires a register of users and a centralised record of financial transactions. Pix provides both, as each user must have a tax identification number registered with their connected bank account. The BCB is piloting Drex on a wholesale basis with firms such as Santander, Visa, Mastercard and Google.

The biggest drawback for the government is that Pix’s popularity means any bad news connected to it causes problems. In January Brazil’s federal tax agency announced that it would require all firms handling Pix transactions to disclose those worth more than 5,000 reais. Right-wing groups falsely spun this to say that the left-wing administration of President Luiz Inácio Lula da Silva was going to tax Pix transfers. The ensuing uproar was so intense that Lula’s approval ratings plunged to their lowest point yet—and the government reversed the measure. That is a small price to pay for such digital wonders.