New instant payment system closer to launch in Brazil

. Aug 13, 2020
New instant payment system closer to launch in Brazil Image: WindAwake/Shutterstock

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Today’s newsletter has a whole lot of tech! From the Central Bank’s new instant payment system, to delivery drones and their impact on workers, to Google taking heat for their ad system. Also, what to expect for Brazil’s labor market.

Central Bank approves regulations for instant payment system

The Brazilian Central Bank has officially

approved <a href="https://www.in.gov.br/en/web/dou/-/resolucao-bcb-n-1-de-12-de-agosto-de-2020-271965371">regulations</a> for PIX, an <a href="https://brazilian.report/tech/2020/06/16/how-disruptive-will-whatsapp-pay-be-in-brazil/">instant payment system</a> set to be operational by November 16. Announced in February, PIX will allow transactions to be concluded in no more than 10 seconds — and accounts will be credited instantly, at any time of the day. Currently, transactions can only be processed and credited to recipients during business hours. </p> <p><strong>Why it matters.</strong> The Central Bank hopes PIX will accelerate the digitization of Brazil&#8217;s financial system. That would guarantee safer transactions and limit the so-called &#8220;underground economy.&#8221;</p> <ul><li>A study by consultancy Boanerges &amp; Cia — which specializes in finance retail —&nbsp;predicts that PIX may cut the use of banknotes in Brazil by half over 10 years. The study says that just under one-third of all payments in Brazil in 2020 will use banknotes, a rate set to go down to 15 percent by 2030.</li><li>Interestingly, however, the Central Bank has recently <a href="https://brazilian.report/business/2020/07/31/central-bank-launch-new-brl-200-bill-what-changes/">launched a new BRL 200 banknote</a> —&nbsp;a move that goes in the opposite direction.</li></ul> <p><strong>E-commerce.</strong> The new payment method could end one of the biggest hurdles for the full development of e-commerce in Brazil: the <em>“boletos,”</em> a type of bar-code based bank-issued invoice that accounts for 25 percent of all online payment transactions in Brazil, but generates many fees. Half of purchases through this payment method fall through, generating extra costs to merchants.</p> <ul><li>The Central Bank believes PIX will also speed up deliveries of products sold online, as merchants will have instant confirmation that a payment has been processed.</li></ul> <p><strong>How it will work.</strong> From October 5 on, customers will be able to register &#8220;keys&#8221; in order to receive payments — these will serve as their IDs on the system. Mobile numbers, individual and corporate taxpayer IDs, and email addresses are some examples of data that can be used as a key by customers. Peer-to-peer transactions will be free,&nbsp;but financial institutions will be able to charge for corporate transactions, whether they be with an individual or another company.</p> <ul><li>The cost of transactions will be much lower for banks. They are set to pay 1 cent for every 10 cents sent through PIX. They currently pay seven times that amount for each TED transaction (Brazil&#8217;s express wire transfer method).</li></ul> <p><strong>Imposed choice.</strong> To make sure PIX will catch on, the Central Bank has forced financial institutions with over 500,000 clients to adopt it as an additional mode of transaction. That rule encompasses all major banks — responsible for 90 percent of transactions in Brazil.</p> <ul><li>The Central Bank informed in June that 140 financial institutions — including banks, fintechs and payment companies — have requested authorization to operate PIX.</li></ul> <hr class="wp-block-separator"/> <h2>Drone delivery gets go ahead, but will affect couriers</h2> <p>The National Civil Aviation Agency has given authorization for food delivery giant iFood to begin tests on deliveries using drones. Two companies — Speedbird Aero and AL Drones —&nbsp;got their licenses to begin trials, which will happen in Campinas, a 1-million-people city two hours north of São Paulo. If trials are successful, iFood has already identified 200 other cities where it intends to extend drone operations.</p> <p><strong>How it will work.</strong> In phase 1, scheduled to begin in October, drones will work as support for traditional delivery methods. The small aircraft will transport orders from restaurants to a delivery hub — with traditional couriers making the final leg of the delivery. That could reduce payments for delivery drivers, whose earnings are based on the total kilometers they drive.</p> <ul><li>The future spells automation, especially with recent feuds between app companies and workers, who recently staged a <a href="https://brazilian.report/tech/2020/06/19/brazilian-delivery-app-workers-rise-up-telecom-regulations-5g/">one-day strike asking for better pay</a>. An experimental route between a shopping mall and a gated community is expected to be set up.</li></ul> <p><strong>Why it matters.</strong> Work for delivery, courier, and transport app companies has become one of Brazil’s main drivers of job creation numbers in recent years — the number of workers in the sector is currently estimated to be at 4 million.</p> <hr class="wp-block-separator"/> <h2>Unemployment rates in Brazil set to jump&nbsp;</h2> <p>Labor data in Brazil shows a steep deterioration in employment rates in June —&nbsp;suggesting that the expected &#8220;job apocalypse&#8221; has not ended, and that the worst may be yet to come. After parking at around 12.9 percent in March, April, and May, the unemployment rate jumped to 14.2 percent in June, according to researchers Tiago Martins and Daniel Duque, of think tank Fundação Getulio Vargas.</p> <p><strong>Why it matters.</strong> The pandemic has dramatically impacted the economy, but we still don&#8217;t know to which extent. Depending on sanitary conditions and the end of restrictive measures, millions could go back to looking for work and drive unemployment rates to unseen levels.</p> <p><strong>Future.</strong> Informal labor is set to be the norm in the post-pandemic economy, just as it was after the 2014-2016 crisis. According to the think tank, there was a 24-percent reduction in the number of informal workers during the coronavirus crisis, and a 12-percent reduction among self-employed people.</p> <hr class="wp-block-separator"/> <h2>Google to explain itself to accounts court</h2> <p>Google requested a hearing with Bruno Dantas and Vital do Rêgo, two members of Brazil&#8217;s Federal Accounts Court — a sort of audit tribunal that monitors public spending. On Tuesday, Mr. Dantas suggested during an event that the federal government should suspend all contracts with the tech giant if its algorithm for ad banners &#8220;is not compatible&#8221; with the Brazilian Constitution.</p> <ul><li>The reason for the disgruntlement is the revelation that the federal government has run ads on sites spreading fake news through Google AdSense, an automated system that creates personalized ads based on internet users&#8217; online behavior.</li><li>Last month, Mr. Rêgo forbade the government from &#8220;directing money for ad campaigns&#8221; to websites and platforms related to illegal activity.</li></ul> <p><strong>What they are saying. </strong>Google plans to ensure the accounts court that it offers &#8220;robust controls for advertisers — both public and private — to choose how and where they want to display their ads.&#8221;</p> <p><strong>Why it matters.</strong> Simply banning the use of Google AdSense doesn&#8217;t seem to be the right approach. It is not the algorithm that is incompatible with the Constitution, but how the administration is using it. After all, advertisers <em>do</em> have some agency in how their brands appear in automated ads, being able to block certain websites.&nbsp;</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Spending cap.</strong> After two top Economy Ministry officials resigned and exposed a rift in the government over <a href="https://brazilian.report/power/2020/08/12/paulo-guedes-is-losing-the-battle-for-brazilian-public-spending/">who gets to control government spending</a> on public services and infrastructure, President Jair Bolsonaro — flanked by the heads of both congressional houses — publicly stated his support for privatizations and structural reforms. Mr. Bolsonaro, however, has been the biggest obstacle to a more libertarian economic approach — as his track record as a congressman shows, the president actually believes the government should have a bigger role in the economy.</li><li><strong>Congress.</strong> The government has a new whip in the House, with Congressman Ricardo Barros, a seasoned politician who has previously served as Brazil&#8217;s Health Minister, replacing the wildly unskilled Major Vitor Hugo. Despite Mr. Barros&#8217; political abilities, the choice is puzzling for a president who promised to crack down on corruption — the new whip faces accusations of malfeasance for paying a medicine supplier BRL 19 million for a service that was never delivered.</li><li><strong>Coronavirus. </strong>São Paulo Governor João Doria announced he has tested positive for the coronavirus. On social media, Mr. Doria <a href="https://twitter.com/jdoriajr/status/1293574155653337090">said</a> he is asymptomatic and “feeling well.” He is the 11th Brazilian state governor to have tested positive for the virus. President Jair Bolsonaro also <a href="https://brazilian.report/podcast/2020/07/08/explaining-brazil-podcast-bolsonaro-is-one-in-a-1-6-million/">contracted the disease</a> early in July, having since recovered. Brazil has 3.1 million overall confirmed infections and over 104,000 deaths.</li><li><strong>Aviation. </strong>Airlines Azul and Latam announced the start of their codesharing deal for 64 routes in Brazil. The agreement was reached in June and is a textbook example of how airlines — which were hit hard by the coronavirus crisis — are trying to optimize their structure to cope with the impacts of the pandemic.</li><li><strong>Car Wash 1. </strong>Courts have ratified the plea bargain agreement of dollar smuggler Dario Messer, who has been incarcerated since June 2019. He is a notorious figure in South American crime rings, even called “the dollar smuggler of dollar smugglers.” According to investigators, Mr. Messer led a scheme of illegal currency operations that ran in 52 countries and was worth over USD 1.6 billion, creating a veritable underground bank for <a href="https://brazilian.report/latin-america/2019/11/20/brazil-operation-car-wash-arrest-paraguay-president-horacio-cartes-corruption/">corrupt politicians</a> and <a href="https://brazilian.report/newsletters/brazil-daily/2019/11/26/weaker-currency-expected-brazilian-economy-minister/">drug cartels</a>. Besides offering information to prosecutors, Mr. Messer will surrender around BRL 1 billion (USD 184 million) to the public coffers.</li><li><strong>Car Wash 2. </strong>The longest anti-corruption effort in Brazilian history, Operation Car Wash still enjoys a lot of public support. According to a survey by DataPoder360, 53 percent of Brazilians consider it to be &#8220;an important tool in fighting corruption and does a positive job.&#8221; Meanwhile, 30 percent believe &#8220;the operation was important, but has committed abuses as of late.&#8221; Despite retaining majority support, the operation is far from the 80-plus-percent approval ratings it enjoyed back in 2018.

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