Brazil central bank chief predicts death of credit cards

Brazil central bank chief predicts death of credit cards

Brazil’s central bank chief Roberto Campos Neto believes credit cards are on the brink of extinction due to growth in account-to-account based open payments.

Speaking at an event about cryptocurrencies, and as reported by Reuters, Campos Neto projected that users will soon control all aspects of their financial life in one “integrator” on their mobile, rather than having many apps from different banks.

This will allow the development of cash management products for individuals and users to choose between, with payments handled by the Pix instant payment system, he added.

Pix is the Brazilian account-to-account payment method launched in 2020. The platform has been widely adopted by Brazillians and has already overtaken credit and debit card transactions by volume across the country.

“This system eliminates the need to have a credit card. I think that credit cards will cease to exist at some point soon,” said Campos Neto, noting that banks have already started using Pix to offer credit.

According to Campos Neto, Pix could first expand “at least” to Latin America. He said Canada has also shown interest in the system.

Comments: (10)

A Finextra member
A Finextra member 15 August, 2022, 12:233 likes 3 likes

Good thing Central Bankers dont run retail banks then! 

Ed Adshead-Grant
Ed Adshead-Grant - Bottomline Technologies - London 15 August, 2022, 17:13Be the first to give this comment the thumbs up 0 likes

One to watch - tech adoption rates accelerate every year.

A Finextra member
A Finextra member 15 August, 2022, 18:161 like 1 like

I wonder who& how covers the fraud cost in this set up? Is it on consumers or is it somehow shared between the participants of PIX (contributing to some sort of 'insurance' buffer or fund)? (as highly unlikely Central Bank regulates the liability shift or deals with arbitration or anything like that)

A Finextra member
A Finextra member 16 August, 2022, 08:15Be the first to give this comment the thumbs up 0 likes

Interesting to see how instant payments cover credit needs. A detail of this use case will be handy (for non-Brazilians) to fully comprehend why the uptake of Pix will result in proportional decline of Credit needs being met through credit cards.

Gerard Hergenroeder
Gerard Hergenroeder - Payments Shark - Millersvile 16 August, 2022, 10:401 like 1 like

This is not going to happen. There are market factors that will support the need for credit cards, namely consumers need a loan. In the U.S.about 2/3 of all credit cards have loan balances. The other 1/3 loose money.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 August, 2022, 11:341 like 1 like

At the peak of re/demonetization, a govt honcho predicted that credit card and POS will be dead in India in 3 years.

5 years later, the count of credit cards and POS terminals has shot up by three times - despite India's A2A RTP UPI becoming a blockbuster hit during the same period.

This turned out to be one of the most harebrained predictions of all times!

To democratize credit, UPI operator NPCI recently announced that UPI will soon support credit card as another funding source.

Robin Setty
Robin Setty - ACI Worldwide (EMEA) Limited - Watford 16 August, 2022, 13:531 like 1 like

I wonder if this article is missing some of the context because I can't understand why a senior banker would say that.  Instant Payments and Credit Cards are two very different propositions covering different needs.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 August, 2022, 15:561 like 1 like

Was a time when PFM and Payments Fintechs, running off of bank accounts and credit card rails, would posture to disrupt banks - an obviously ridiculous posturing. 

I'm guessing this central banker is imitating those  Fintechs.

Also, going by India, A2A  rail is domestic, credit card rail is largely owned by foreign entities, so I won't rule out a bit of nationalism in the "A2A will kill Credit Card" posturing.

A Finextra member
A Finextra member 16 August, 2022, 18:01Be the first to give this comment the thumbs up 0 likes

Credit cards with installment loans/Easy Payment plans (call them what you will) offer banks a simple way to join the BNPL rush - with special terms running up to interest free/24months etc...   Why would banks turn away from this.... 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 August, 2022, 12:55Be the first to give this comment the thumbs up 0 likes

Because regulator may not let them leverage such opportunities?

I don't know about Brazil but many major regs in payments space in India in the last 2-3 years - e.g. Positive Pay, Emandate, CoFT - have added friction to cheque and credit card payments and intentionally or unintentionally diverted cheque and credit card volumes to UPI.

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