Financial and Technological Innovation in Payments in the United States and Brazil – Willian Dominguez/ Pascoloto

Willian Dominguez*

Payment systems have always been the peaceful pillars of any economy. However, the United States and Brazil have approached their payment infrastructures in different ways.

We know that the United States is widely recognized as a global economic powerhouse, but ironically, its payment infrastructure is considered outdated and inefficient. The arrival of FedNow, launched by the Federal Reserve in July 2023, marks a significant leap forward in the field of financial and technological innovation. Later you will understand that the US may call it PIX.

Financial aspect

For a long time, the North American banking system was based on systems like ACH (Automated Clearing House – Network for Electronic Bank Transfers), which eventually became check and card networks. The problem is that the delay in the settlement of these systems has become a financial and operational bottleneck. FedNow not only promises instant settlement of transactions, but also integrates various payment methods such as B2C, B2B and P2P.

The rise of fintechs and apps like CashApp and Venmo gave us an indication that changes would be coming, but ultimately we saw these companies still operating on ACH tracks. The challenge of modernizing payments without compromising stability is always adopting new technologies. Although ACH is “slow”, it is always stable.

FedNow, with its 24/7 operation and “push-only” approach, exemplifies the U.S. commitment to pursuing technological innovation without sacrificing reliability.

So far 35 financial institutions are in the program and FedNow has the potential to democratize access to real-time payments, encourage more transactions and contribute to a more fluid and dynamic economic cycle. Something we saw with PIX and mass banking when there was a pandemic in Brazil.

If we draw a line of comparison, Brazil, on the other hand, was able to quickly implement PIX and was born as a modern response to the needs of a population.

Social change

For the US, the challenge is to overcome the inertia of the old systems. FedNow is paving the way for reinventing the country’s financial landscape by providing a more efficient system. The pandemic has only emphasized the need for this innovation. However, it is important that financial institutions of all sizes, from large corporations like Goldman Sachs to local community banks, embrace and promote this change.

In Brazil, from the start, PIX was not only a payment platform; He became an agent of social change. In a country where inequality often dictates access to essential services, PIX has managed to democratize financial transactions. Coupled with this, the emergence of many digital banks has further accelerated this equation. Also, previously unbanked communities find PIX an inclusive tool that reduces dependence on physical cash and enables a secure and transparent financial environment.

the future

Perhaps in the future your financial identity, healthcare, education and even your carbon footprint will be interconnected in a payment network. If PIX is still going strong today, it will serve as a portal to a wider digital ecosystem. We may be looking at payment systems that fully integrate with the Internet of Things (IoT), automatically pay for deliveries in the event of food shortages, or allow our refrigerators to restart automatically, all using the PIX platform as a B2C payment system. B2B or P2P.

If you think of PIX as a super platform integrated with blockchain and smart contracts, we could see hyperconnectivity in the medium term.

Conclusion

Continuous and significant innovation in payment systems is essential. Both the US and Brazil have lessons to learn from each other. As the US seeks to accelerate its adaptation, Brazil can show how a country can quickly adopt and benefit from modern financial systems. The future promises to be exciting for both countries. I see we have a new breed of financial payment supremacy and I dare say our athlete has achieved great results in his training.

* CIO of Pascoloto