Welcome to another issue of Labrys Insights, your newsletter on technology design and policy.

Today, we'll cover:

Our 2023 wrap editorial;
A recap of all our RTP publications of 2023; and
Three graphs proving Pix is not done amazing us with numbers.

Well, folks, 2023 is a wrap. We want to thank you all again for accompanying us throughout this year. 2023 was the year we decided to start building a company we could be proud of. 10 months later, we have published 9 long-form articles and 34 newsletter issues. That's over 400 pages of analysis and insights on technology design and policy. And the community of systemic thinkers here at Labrys Insight is growing every day. We kickstarted three moonshot projects and welcomed to our team some of the people we most admire in their fields. To top it all, in these first 10 months we were also accepted into the Pix Forum by the Brazilian Central Bank and started contributing directly to the evolution of Pix.

In 2024, we'll continue developing and applying our systemic approach to tech and will put even more energy into our moonshot projects. We'll work on scaling the projects you are already familiar with (Pix Evolution and The Next Generation of RTP Rails). And we hope to reveal our third (and so far yet stealth) project in early 2024. So stay tuned! And invite your friends... The world needs systemic thinkers more than ever.

For today, we'll finish our 2023-in-review series with a recap of our publications on real-time payments and with a quick update about Pix's statistics.

Now, let's get to it.

M. and J.

Labrys on real-time payment in 2023

We're not a payments innovation lab. Our scope is not limited there. But we sure love to study and discuss about payment systems!

Here is our top 5 articles to revisit or to read for the first time, if you haven't already:

Lessons from Pix: The first publication had to be our most popular yet. In this document, we go into the key technical decisions that enabled Pix to be the success case it is. We go deep into how and why Pix works the way it does. We also add some considerations of improvements we would recommend to new real-time payment rails to enhance functionality, flexibility, and user experience, ultimately unlocking the full potential of real-time payments.
Pix Forum Contribution: Automatic Pix: This publication discusses the contribution we made to the Pix forum regarding automatic Pix transactions. The proposals put forward in this document aim to enhance the user experience and provide practical solutions for implementing automatic payments within the Pix system. One of the key proposals is to decouple the flows of automatic debit authorization and ICOM debit requests. By separating these two processes, the user experience for payers can be simplified. The payer would only need to authorize automatic debits once, and subsequent payments would be made automatically based on the agreed-upon terms. This approach allows for more flexibility in scheduling payments and reduces the complexity of managing payment requests.
Automatic Pix and How to Design a Platform: This is a more conceptual one. We discuss the difference between building a product and building a platform and the difference it makes to the success or failure of a venture.
Pix and the Commoditization of Payments: Here, we examine the case of Pix and P2M payments in Brazil, highlighting reasons why this market is prone to commoditization. In light of Clayton Christensen's Innovation Theory, we suggest that firms can still find opportunities in payments by integrating backward into backend processes or by identifying key capabilities of existing payment methods and integrating them into Pix's architecture.
A New RTP on the Block: Here, we share some thoughts about FedNow, the new real-time payments (RTP) rail launched by the Federal Reserve in the US, which aims to modernize the country's payment infrastructure. While it operates 24/7/365 and completes transactions in 20 seconds or less, its lack of mandatory participation make it challenging to achieve critical mass and strong network effects. We also discuss the rail's architecture, liquidity management, transaction limits, and other details, highlighting potential issues and differences compared to other RTPs like Pix in Brazil.

More Pix statistics to wrap up 2023

We came by an analysis we made earlier this year about Pix Q4 2022 statistics and want to give a quick update about that. At the time, we discussed P2B use case and said:

The number of Pix transactions surpassed those of all other payment methods in Brazil a year ago. However, the Pix Statistics website allows segmentation of the number of transactions by payer and payee nature. Comparing the number of card transactions with Pix transactions in P2M scenarios, we can see that Pix still has miles to go to reach credit and debit card penetration in person-to-merchant payments. (…)

Note: BCB only has segmented data of transactions that go through SPI, which represents about 0.85 of all Pix transactions. For that reason, an approximation was made by multiplying the number of P2B transactions by 1.15.

It is not surprising that Pix gained traction first in P2P transactions. That is exactly what happened in India when UPI first went live. The experience for P2P in the Pix rail by default is excellent, and it's free for individual accounts to send and receive money. In P2M use cases lie the biggest opportunities to build solutions on top of Pix and create products customers and merchants could love.

Updating these numbers, we have:

There's still a million caveats to this analysis. It does not exclude corporate cards, we're still estimating the total of P2B transactions by extrapolating the proportion of inter and intra-bank Pix transfer, and, as you can see, the data about card rails take longer to be released.

Regardless, it's interesting to see how much closer Pix P2B is getting to the card rails. It has already surpassed prepaid cards in terms of number of transactions and there are strong indications that it might have also surpassed credit cards in terms of the amount of money transferred.

Can't wait to see the complete dataset for 2023!

RTP and Pix in 2023