Outbound small business payments: the top untapped opportunity for cross-border payments in Brazil

Brazil continues to make headlines globally for its innovations in payments. Pix, the Central Bank’s real-time payment system launched in 2020, has rapidly become the most widely used payment method in Brazil, and according to the Central Bank of Brazil and the Prime Time for Real-Time Report study, 1Pix represented 15% of instant payments globally with nearly 30 billion transactions. The Central Bank is also one of the most advanced in the world with respect to central bank digital currency and in March 2023 announced the winners of the LIFT challenge, a crowd-sourcing competition that asked industry stakeholders to develop potential use cases for the Digital Real. In the private sector, Brazil is home to the world’s largest neobank in terms of market capitalization, Nubank, and data from the Central Bank reports that financial inclusion is Brazil is well over 90%. In nearly all ways, Brazil’s public and private sector are stretching the limits of financial technology, pushing into fringe use cases, determined to solve the inefficiencies that still belabor money movement in the country.

One area where Brazil has not yet earned global headlines is in cross-border payments. Brazil is a relatively closed market with respect to foreign exchange, compared to trade Mexico, for example: Brazil’s trade-to-GDP ratio was 40% in 2021 compared to Mexico’s 84%. 2This is due to the sheer size of Brazil’s domestic market (8th largest in the world), and to regulation, including a variable “IOF” and withholding tax applicable on certain foreign exchange transactions, and strict requirements on which institutions can access the foreign exchange market.

Even so, just about anything in Brazil can be considered big, due to the sheer size of its economy, and Brazil has attracted a lot of investment and fintech to various cross-border use cases. Here is a look at some numbers in the outbound cross-border market in 2023 (estimated forecasts):

1BCB, 2023. “Pix is one of the world’s most used instant payment systems.”

2World Bank