[kyrra]

The BCB in Brazil does very little to operate Pix. It's effectively a P2P system, where the BCB forces all the banks to interop with one-another (and all the banks directly call eachother). They can operate it that cheaply because they do close to nothing technically (they host the main discovery endopints). The only place the BCB actually ingests data is via their reporting mechanisms.

UPI is a bit more centralized, where the NPCI does the top-level routing between banks, so their operating budget is likely much higher than Pix. It also is drastically more simple to be a participant in UPI compared to Pix.

For Pix adoption: you can thank Covid for that. The Brazilian government said if you wanted to get free money from the government, you had to set up and use Pix.

US Financial Innovation: I'd say the hard thing here is that the government is extremely strict (lots of regulation) when you start looking like a bank. Lots of companies have tried to innovate here, but regulation makes it really hard to do. There's a lot of regulator capture going on.

[elzbardico]

This is incorrect . The system is not P2P, while it appears to be for customers. The BCB keeps both the directory that ties a chave pix to an actual account (DICT), and a centralized ledger (SPI - Sistema de pagamentos instantaneo)

[Payer bank] ──(1. Lookup key)──> [ DICT - Name Service] (Returns account data)

         │

  (2. Send order)

         ▼

     [ SPI - Central Ledger] ──────(3. Real time settlement over Financial Institutions account: Debt/Credit)

         │

  (4. Notification Message)

         ▼

[Receiver Bank]

The ledger doesn't keep individual accounts, but a Instant Payments account for each institution. This account is not the master bank account in the Reserve Transfer System (Sistema de Transferencia de Reservas) which is the system of record for banks funds, so the banks need to allocate funds from the STR to the SPI every day to be able to honor PIX transfers. The STR system doesn't work out of normal banking hours, so the banks need to predict how much money they will need for PIX transfers and move that money from the STR to the PI (pagamento instantaneo) account during defined liquidity transfer windows, to avoid banks double-spending the same funds over different rails (traditional vs PIX). If a bank finds itself without funds on its PI account in a saturday night, it can loan the funds from another bank who still have excess liquidity on his PI account).

As you can see, between the SPI, STR an DICT, it is a very centralized system.

Also, the system operates in a dedicated zero-trust networks which is completely isolated from the internet. The messages between banks and the central bank follow the ISO 20022 format. IBM MQ is used to route messages back and forth between banks and the BCB.

[marciob]

In both Brazil and the US, making something like Pix mainstream requires regulation. Brazil did its part, but it’s unclear whether the US will do the same anytime soon, I don't think so, unfortunately. Technically, it would benefit the American population (the process of making pix payments is so smoothless), but payment companies may have little incentive to support it, and could lobby against it.

In Brazil, the Central Bank overpowered the coordination problem. In the US, it may be the opposite: the government seems to have less power over the payment lobby, or at least less willingness to confront it directly.

[ksec]

Thanks for that. I am wondering if anyone have written up a high level technical comparison between different payment systems including Pix, UPI and others.