Brazil is about to revolutionize its banking system. In a little more than a month, the country will say goodbye to an infrastructure that made payments a nightmare even though Brazil boasts one of the most thriving economies in the world.
Such is the potential Brazil has to offer, that Ripple chose that country to settle its offices in Latin America and expand throughout the region.
Even Ripple’s top executives — including the creator of the infamous Bitlicense— met with the president of the Central Bank of Brazil to discuss confidential matters, and some Brazilian banks have successfully tested Ripple’s technology to process international payments.
But all this is about to change.
Starting in November, the Central Bank of Brazil announced that all banks would implement a new banking infrastructure to process cross-platform transactions.
Not considering the whole philosophical part, the new PIX system is the dream of every cryptocurrency enthusiast (and anyone with a bank account). It will allow free interbank transfers 24 hours a day, 365 days a year, with readable data – such as email, id number, or phone instead of long abstract account numbers, instantly and without limits.
Currently, transfers are only processed on workable weekdays, from 8 to 5 pm, and have costs ranging from 0 to 16 Reais ($2.8). The time it takes for the money to appear on an account goes from a few minutes to several hours or days, depending on the method and the bank chosen.
Hence, once PIX goes public, the appeal of many cryptocurrencies could lose many points as a means of payment. In fact, it would be like applying Ripple technology to banks… but better.
So, will crypto die in Brazil? Probably not, but their use will continue to be relatively low. There is not yet a Bitcoin culture in Brazil, and cryptocurrencies are seen more as risky investments than as Stores of Value or means of payment.
And if PIX delivers what it promises, it will probably beat many cryptocurrencies in their own game. Let’s take two examples to see which one an ordinary citizen would prefer:
First one, send $70 with 0 fees, in 1 second to your friend’s email address. The second example would be to send 0.00642874 BTC with 0.00037417 BTC of fees, in approximately 30 minutes to address bc1qmydp82m8nnr9nxenjnfmdtctde96j60r6qx696.
The decision may seem obvious.
Fiat vs. Crypto, or Brazil’s PIX vs. Ripple’s ODL.
Ripple’s promise to offer fast and cheap payments would lose against the Central Bank and its instant and free payments. In fact, according to estimates from the Brazilian news outlet Veja, Brazilians will save at least 19 billion Reais (3.3 billion dollars) a year in transaction fees only.
“The lack of cost, combined with the simplicity and speed of the transaction, indicates that the PIX will have a significant impact on banks and card payment processing companies. It is estimated that these two sectors will lose about R$19 billion in revenue per year.
This volume of funding is related to the amount that financial institutions collect with TED and DOC transfer fees, the use of self-service terminals, fees for card transactions, and fees for the generation of payment receipts. All of this can, in part, be replaced in the new model.”
So far, Ripple has not commented on its interests in the region. Still, considering the situation, they may have to focus on offering efficient alternatives for the international payments market because Brazilians will be too in love with their central bank when transferring money among themselves.