Financial inclusion: digital payments for the unbanked

See data research on the unbanked in Brazil and find out how digital payment technologies have streamlined access to financial systems in recent years.

 

 

Brazil has 213 million people and 16% of the adult population is unbanked. Unbanked also means switching from traditional banking institutions to fintechs, for example. 30% of Brazilian were unbanked in 2017. 

 

Brazilian consumers have taken to digital payment methods and debit/credit cards, generating BRL 182.7 billion in e-commerce sales in 2021. This shows the importance of understanding how they spend. 

 

The unbanked in 2022: why are people unbanked?

 

According to the recent figures from Global Findex, 1.7 billion people around the world have no bank account for several different reasons. The main reasons include high banking fees, physical distance to bank branches, existing debts, lack of trust, the documents required to open an account, a lack of financial education, informal employment, and so on.

 

According to the Capco study “Financial Inclusion – Evolution and The Digital Push”, most of the unbanked live in developing regions such as Africa and South America. 

 

Financial inclusion, the Brazilian way

 

Up until just a few years ago, Brazil’s banks faced little competition, with only a handful servicing hundreds of millions of Brazilians. This is changing with the rise of fintechs that are now providing services only banks used to offer, but without having to be permanently tied to the bank or go through a series of procedures that can be bureaucratic and chargeable for Brazilians.

 

The Central Bank of Brazil (BCB) is currently implementing its AgendaBC# to democratize finance. It started on this path in 2007 when it gave financial institutions without a banking license permission to offer digital payment accounts that benefitted from tariff exemptions and lower regulatory requirements for the low-income population.

 

Government aid has helped lower the number of unbanked people

 

Many governments have implemented programs to help the low-income population since March 2020, when the Covid-19 quarantine began. People could access financial support, known as the coronavoucher in Brazil, through the Caixa Tem app. The app offers transfers, boleto payments, QR Code payments, prepaid phone credits and withdrawals. 

 

According to “Expediting financial inclusion during the Covid-19 pandemic” study by Americas Market Intelligence in partnership with Mastercard, 66 million people had received financial support via their free digital account by August 2020. Estimates indicate 36 million of them were previously unbanked. 

 

It is worthwhile analyzing how people used the app during the program’s first few months. In May 2020, most beneficiaries transferred their benefits to other accounts or withdrew the money in cash. In August of the same year, the app’s virtual debit cards and boleto payments had become some of the most popular services. This initiative helped Brazil reduce the number of unbanked by 73%.

 

Corporate Pix: attracting cardless customers 

Pix – Brazil’s instant payment system – was launched in November 2020 and has quickly become very popular. There are currently over 450 million Pix keys registered by more than 130 million people. Transactions are free for individuals, unlimited, take seconds to be processed and the system operates 24 hours a day, 7 days a week. Users must have a bank account or fintech digital wallet to use Pix. People with credit restrictions or restricted access to credit can use Pix as an alternative to TED and DOC transfers, which incur fees. New features are also on the way!

 

Pix in installments and buy now pay later

 

The recent buy now pay later trend in other countries is something Brazilians are already very accustomed to. Installment plans let consumers purchase higher-cost products without compromising their budgets. This ultimately boosts e-commerce sales and leads to a higher average ticket.

 

Prior to 2022, consumers could only make buy now pay later purchases on credit cards, although some physical stores have long offered offline and in-store installment plans: one example is the boleto payment plan. As it has evolved, Pix has also incorporated a new feature: Pix in installments – a form of personal loan from banks. The seller receives the full amount while the buyer pays the installments – plus interest – to their bank. Customers are not required to have a positive account balance and can pay in 12, 24 or up to 60 installments.

What is a boleto and what does it mean for the unbanked 

 

The boleto obviates the need for a bank account or credit facility; boletos can be paid at any bank branch, lottery outlet or using a mobile or desktop app. Utilities such as energy, water and gas are usually charged via boleto. 

 

Many still prefer to shop and pay using boletos. The Gmattos Payment Study published in May 2022 reported that 76.3% of Brazilian used boletos. However, the boleto is losing ground to Pix: in July, Pix and boleto were tied at 78% as the second most popular payment method in Brazil, behind credit cards.

 

All e-commerce platforms need is for their payment provider to accept boleto payments. Consumers conclude their purchase as usual and choose this payment method. They then print the boleto and pay it in cash using one of the options mentioned above. As they have up to 3 days to pay, boletos are also an option for undecided buyers who want to reserve a product. If the boleto is not paid, the product returns to the store.

 

Accept all Brazilian payment methods with Bexs Pay

 

Brazil has over 200 million consumers and most do not have an international credit card. But this doesn’t mean you can’t sell to them. International companies that offer goods and services online can incorporate a local payment provider to attract Brazilian customers. Bexs Pay offers payment processing and FX solutions that automatically convert fees and prices for Brazilian consumers, while you get paid anywhere and in any currency. Talk to our experts!