The days of using cash are numbered

Sending a text message to pay for a bus ticket in Turkey, using a QR code to buy groceries in China or bringing your cell phone close to a sales terminal in the United States to complete a payment. Even before Covid-19, these ways of paying for goods and services were evidence of a steady evolution towards digital payments that could practically abolish cash in society, as shown by a a study by PwC and its strategic consulting arm, Strategy&.

According to the survey, global volumes of payments made in this way are expected to almost triple by 2030, compared to 2020. By the end of 2025, the consultancy estimated that they would grow by around 80%, with transactions rising from around 1 trillion to almost 1.9 trillion a year. In Brazil, the means of payment scenario is keeping pace with this evolution, driven by the digitalization of the economy and the search for greater efficiency in financial transactions.

"The country is at the forefront of financial inclusion, with promising regulatory and technological initiatives, which have led to a significant increase in competition between traditional banks and fintechs," says Antonio Carlos Freixo Junior, Mineiro, founder and CEO of Grupo Entre, an investment company whose portfolio includes EntrePay, a developer of solutions for companies to use their own card machines.

The Entre Group's ecosystem also includes commercial automation platform startups focused on the food and beauty segments (Linked Gourmet e Linked Beauty), as well as companies offering financial services such as P2P loans - between people, without the intermediation of banks - (WMoney), credit advances and securitization (Leads).

Encouraged by the Central Bank (BC), fintechs have started to offer new payment solutions and have forced traditional banks to move in the same direction, with new technologies, interoperability, cost reduction and open competition.

QR code payments are helping to leverage instant payment infrastructures, providing easy and inexpensive access to digital payments, whether through a traditional POS device or a mobile device for merchants and consumers.

Pix, the instant payment model established by the Central Bank, is an absolute success. In addition, near-instant payment methods have emerged that use the rails of card networks and are operated by digital competitors.

The new models are expected to impact traditional payment methods such as TED, boleto bancário, checks and even cards in the next five years, notes PwC. Considering these infrastructures and the existence of new fully cloud-based providers, banks are already re-evaluating their financial models and solutions.

PwC also points to the new regulatory frameworks as one of the dynamos in this process. Simplified banking license models, such as Direct Credit Companies (SCDs) and Payment Institutions (IPs), have brought new competition to the market. In addition to the expansion of fintechs, Brazil has more recently seen a high incursion of traditional industries, such as retailers and telecommunications companies, into the creation of financial services companies.

This competitive environment should become even more contested with the completion and maturing of Brazilian Open Banking, which is quite comprehensive, especially when compared to other international models.

Open Banking is a set of rules and technologies that allows financial institutions to share data and services by integrating their systems. It promotes decentralization and eliminates the traditional boundaries between banks and fintechs, allowing customers to own their financial data and choose which companies they want to share it with.

State-owned banks, meanwhile, have launched digital wallets to pay social and Covid-19 pandemic-related subsidies to the population, as well as promoting discounts for their customers. This is helping to expand the adoption of digital payments, especially among people with no experience of banking.

_{Photo by Daniel Dan}