Rise of the Brazil Stack

With modern payments, systems have sought to be integrated, interoperable and adaptable to different contexts and needs, making technology easy to integrate and interoperate. This will ensure that new tech will never last for a specific phase in the user's life, but built to endure through years and years, being a part of users' routine, evolving constantly.

Take the Pix for example. Many payment systems are initially created to solve specific problems or serve particular use cases, which makes them inflexible to new requirements and expensive to maintain. When new needs arise, it is necessary to adjust or even create a new system from scratch – as was the case in Australia, with the New Payment Platform, and in India, with IMPS/UPI –, which can be a time-consuming and costly. In the case of Pix, from the beginning it was conceived as a platform. This way, the Brazilian regulator thought about using open and easily adaptable protocols to quickly deal with changes and emerging needs in the payments scenario.

Evolution began. It is no coincidence that the Central Bank began the agenda for delivering different use cases for Pix, just within a few months after launching the platform in 2020 - such as Pix Troco, Pix Automático and B2B products like Batch Payments. Now, the system is evolving towards delivering biproducts such as a regulated stablecoin and the Embedded Finance open mindset.

The "super app": Brazil Stack

The buzz regarding the creation of a 'super app' by the Central Bank of Brazil has already caused some fuss. The subject is frequently mentioned in presentations and statements by the organization's president, Roberto Campos Neto, about the convergence between Pix, Open Finance and Drex. In practice, the idea stands for defining the regulatory bases for the market to build its 'super app' experiences. The concept of Brazil App was firts conceived by WFintechs, and has been inspired by the "India Stack" which brought the Indian population to the digital age.

This super app will be used for government's financial affairs and has the potential possibility to be explored by market industries, especially financial products and technology providers. The products that will unfold from the Stack will not be developed by the Central Bank. So, "no one expects a ‘super app’ from the regulator, like something that might replace the banks’ apps”, said Director Maurício Moura in LiveBC #20, a weekly live broadcast made by the Central Bank on YouTube.

He recalled that Open Finance opened a “huge opportunity” for sharing data and leads to increased competition of both Brazilian an foreign (global) payments and fintech players, which “only benefits the customer who receives the service at the end”. He also highlighted that today customers are able to make transactions in several banks from a single account, if user's consent is given. It's the foundation of account-to-account payments, which changed the way people and companies can operate payments in Brazil. Especially because consent, transaction and compensation happen in real-time.

Also according to Maurício, in the technology sector, there is “a natural trend for convergence”, that is, of trying to consolidate the different functionalities in a single environment at the so called one-stop-shops. Therefore, he believes that the path is completed. So, one or more players will develop a super app of some sort using the complete Brazil Stack, and this will happen within a very near future.

Watch the full interview (in Portuguese) below:

Pix, Open Finance and Drex, from regulation to market

More about each piece of the Brazil Stack:

Pix

Pix was built not only to be a new payment method in Brazilians' lives, but rather to be a platform where both the regulator and the industry could operate it and evolve, with new features that are useful for people and organizations. When we compare different payment systems, we see that Pix stands out due to the Central Bank's insightful approach to making it as a platform for creating innovations, using protocols with open and low-cost codes.

Open Finance

Open Finance was created with the purpose of being an open ecosystem where different participants can request their participation and use APIs regulated by the Central Bank to share and receive data from other institutions. The entire ecosystem, from discussion groups to affiliation, is being created by the industry in conjunction with the regulator, which provides a better experience and security for the respective users, and also inclusion and competitiveness.

Drex / Real Digital / CBDC

Several countries are implementing CBDCs mainly for digitalizing payments and promoting financial inclusion. According to the Central Bank, Drex can add innovation through so-called smart contracts. They will provide opportunities to optimize contracts in various sectors. This applies to real estate transactions, loan agreements, international payments, social assistance programs, employment contracts, insurance, supply chains, copyrights and lending. They are expected to automate processes, ensure accurate execution of agreements and reduce the need for intermediates, making transactions more efficient and cheaper.

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