Tech Roundup: The future of instant payments in Brazil

. Dec 18, 2020
Tech Roundup: The future of instant payments in Brazil Image: Julia Tim/Shutterstock

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: how the instant payments industry will fare in 2021. A new IoT law could boost hires in Brazil. And the Justice system’s efforts to go digital.

The future of instant payments in Brazil

One of the biggest innovations in 2020, the Brazilian Central Bank’s instant payments system PIX has proven to be a hit. During its first month of operation, 46.1 million individuals and another 3 million companies enrolled, and transactions reached a combined BRL 83.4 billion (USD 16.3 billion), accounting for one-third of all wire transfers in Brazil. Still, the new payment method is in its early days, and users and companies can expect further disruption. 

Telecoms team up for instant payments. PIX could become an even bigger part of Brazilians’ financial life after a deal between the Central Bank and telecom operators which would allow for cell phone credit charges to be made through PIX. This would accelerate an ongoing development, as the use of the tool by TIM’s customers to pay their bills rose by 30 percent.

Retail payments. The adoption of PIX as a payment method in brick-and-mortar shops has been considerably low, with 84 percent of transactions using the system coming on a peer-to-peer basis. A few reasons explain why vendors have yet to join the PIX frenzy: 

  • Firstly, regulators have not been clear on fees for companies using the service. And there is a difficulty in confirming transactions have been successfully processed, as notifications go directly to company accounts, which few employees have access to.
  • Another factor could be the time of year, as companies avoid making changes to their payments structure ahead of major retail dates such as Black Friday or Christmas.

Outlook. Central Bank Director João Manoel de Pinho Mello expects peer-to-business payments to grow, and the competition among the 750 financial players registered to operate PIX will guarantee lower prices.

Fraud. Though the Central Bank ensures the system is safe, scammers have been using PIX for phishing scams. For Carlos Macedo, founding partner at consulting firm Cortex and an expert in the financial industry, it will be up to the Central Bank and commercial banks to educate customers on this new technology. 

Open banking. PIX is the first step of a broader open banking system in Brazil. But the debut of this comprehensive new structure was postponed until February, a move that has not fazed experts. Mr. Macedo sees the Central Bank’s decision to bide its time and minimize glitches as a positive move, given how consequential open banking will be to the financial system’s inner workings.

  • “From now on,” he says, “PIX and open banking represent a challenge to both fintechs and banks, as the winning business model might not have been created yet and could even disrupt fintechs.”

WhatsApp Pay. As we reported, financial players believe the Central Bank could grant operational permits to the instant messaging app’s new payments system by Q1 2021.

Brazil passes new IoT law, hopes for 10 million jobs

The Internet of Things (IoT) sector will start 2021 with a major boost, as a new law is enforced scrapping four different taxes for machine-to-machine (M2M) systems. With this measure, the Communications Ministry expects the sector to create up to 10 million jobs in the next few years.

What is the law about? IoT and M2M equipment, such as sensors used in lamps or security cameras, will be exempt from the following taxes for over 5 years: taxes on radio diffusion (CFRP), movie industry development (Condecine), installation inspection (TFI), and operation inspection (TFF). 

  • Plus, the new legislation scraps the need for previous operating licenses for such machines. 

Impacts. Exempting such a basic input as sensors could create an entire chain reaction for automation and data collection, especially for the 4.0 industry, smart cities, healthcare, and agriculture. 

  • Sergio Sgobbi, Institutional Relations director at the Brazilian Association of IT Companies (Brasscom) says that data collection creates the bases for automatization and the better use of resources. “You could have an agricultural machine measuring soil humidity and the presence of plagues while planting seeds,” he told The Brazilian Report
  • Per Brasscom estimates, IoT investments in Brazil should reach BRL 183.4 billion by 2023. 

Hurdles. Tax breaks for sensors is the beginning of a long series of challenges Brazil will face in order to go digital. Mr. Sgobbi quotes the lack of connectivity as the main bottleneck. In his view, one of the top problems is the delay in installation permits for antennas, as current legislation states that cities do not have a deadline to analyze permit requests. 

  • As we have reported, a new law on antennas was regulated earlier this year, but new regulations on deadlines and permits by city halls are still on the way. “We aim to have it solved in Congress next year. Because without it, there will be limitations, as we need five times more antennas than we have for 5G, due to its lower reach,” says Mr. Sgobbi. 

After a disastrous 2020, justice system continues move to digital

The National Justice Council approved three new rules that could beef up its systems’ cyber defenses, in the wake of massive hacks that wiped records of almost 250,000 cases in the Superior Justice Court (STJ), the second-highest ranking court in the country, and the hacking attempts on the municipal elections in November. 

What’s new? The CNJ created a protocol to prevent cyber incidents (PPICiber/PJ), another to manage cybernetic crises within the judiciary, and a third to investigate cybercrimes. 

  • (PPICiber/PJ) will have a set of guidelines to prevent high-level cyber incidents, in order to establish functions to manage risks and allow a proper decision-making process. 
  • The crisis management protocol will assemble an efficient response to incidents, especially when they happen on a large scale or have long-standing impacts. 
  • The investigation protocol drafts basic procedures to collect evidence in case of wrongdoing and how to report it to the police. 
  • When a crime is committed against the institutions of the judiciary, a crisis committee will be set up according to the new guidelines.  

Innovation. The CNJ also regulated the use of AI this week by using a platform called Sinapses, which will centralize every source code and AI routine updates. It will also include models ready for production, with a description of their case use, accuracy, and an API for integration. However, it will be up to each court to use the platform, as well as train their staff to do so. 

  • The use of AI may help the judiciary find solutions to automate legal and administrative procedures, which may shorten Brazil’s notoriously lengthy legal process. Moreover, it could generate savings and provide judges with data analysis to support their decisions.

Take note 

  • Regulator. The Senate confirmed Vicente Aquino as a board member at telecoms regulator Anatel. In his first two-year term, Mr. Aquino was responsible for analyzing the Time-Warner merger in Brazil, as well as issuing the first draft of rules for the 5G spectrum auction. 
  • Budget. São Paulo lawmakers slashed the budget of research foundation Fapesp by 30 percent in 2021. The institution has been at the forefront of many coronavirus-related studies but will have only BRL 1 billion available next year, despite the state having a slightly larger budget to work with. Earlier this year, Governor João Doria was criticized for trying to make research centers give their profits to the state, instead of using them for reinvestment — the move was struck down by lawmakers.
  • Internet. Telecom operator Claro and agriculture equipment maker John Deere reached an agreement to expand rural connectivity to 15 million hectares in 2021, by installing Claro’s antennas in properties at BRL 20 per hectare. Claro bears the investment, while John Deere dealers will be in charge of sales from January 15 onward. 
  • Telecom. Operators Claro, TIM, and Vivo purchased Oi Telecom’s mobile telephony assets for BRL 16.5 billion, an important step in Oi’s court-supervised recovery process. Now the trio’s market share is projected to grow to 29, 32, and 37 percent, respectively. BTG Pactual sees TIM as the biggest winner of them all, snatching 54 percent of Oi’s spectrum, which grants the company an extra BRL 7.3 billion in market value. The deal is pending regulatory approval, however, in what promises to be a lengthy process.
  • Cybersecurity. Anatel approved a new cybersecurity framework for the telecom sector. Now, operators will elaborate and implement cybersecurity guidelines to control and prevent vulnerabilities in critical networks, having processes to keep services up and running and a plan to tackle incidents. Anatel will be in charge of providing assistance and following up the process; companies will have 180 days to adapt, starting on January 4.[/restricted]
Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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