Emerging Markets’ Leadership on Real-Time Payments: A Comparison of India’s UPI and Brazil’s Pix

Benchmarks for the world

In 2022, 195 billion real-time payments were transacted globally, representing a 63.2% increase versus the previous year. India, with its Unified Payments Interface (UPI), was the largest contributor, generating over 46% of global real-time transactions, followed by Brazil’s Pix, with a 15% share. China, Thailand and South Korea followed suit.

Countries around the world are increasingly looking at UPI and Pix to build their own national real-time payment systems. Prominent initiatives in this direction are the U.S. Federal Reserve's FedNow and the E.U.’s Real-Time Payments mandate. 

Similarities between the two systems are conspicuous. Both UPI and Pix simplify fund transfers between bank accounts by eliminating the need for intermediaries and are interoperable among multiple banks; both have witnessed widespread acceptance and adoption within a relatively short time frame; both facilitate effortless transactions 24/7, allowing users to make payments via mobile phones by entering the mobile number or a recipient ID (UPI ID for UPI, Taxpayer Identification Number for Pix).

Despite those similarities, nuanced differences exist between UPI and Pix, which reflect the different contexts of India and Brazil.

Genesis

The origins of UPI and Pix can be traced to two different and ambitious projects. UPI emerged as an integral part of a comprehensive nationwide digitization effort, forming a crucial component of the India Stack, the digital public infrastructure of India. India Stack is composed of a set of open APIs that allows governments, businesses, startups and developers to utilize a unique digital infrastructure to deliver services in a presence-less, paperless, and cashless manner. The building of India Stack began in 2009 with Aadhaar – a universal ID linked to biometrics – and culminated with the launch of UPI in 2016. On the other hand, Pix was introduced in 2020 as a standalone initiative, conceived to modernize Brazil's payment infrastructure, enhance financial inclusion, and cultivate a more efficient and competitive financial ecosystem.

Features

UPI provides an open-source API that enables a diverse array of mobile payment apps developed by different banks and third-party providers and allows users to benefit from a wide range of UPI-supported payment apps. Pix instead is integrated exclusively into banking and financial apps, and therefore it is common for users to complete transactions directly from the applications of the institutions they have accounts with, be they banks or payment institutions.

The two systems are at different stages of development when it comes to the variety of services they offer. Currently, UPI extends beyond basic fund transfers, offering a wide range of services such as bill payments, recurring payments, mobile recharges and ticket bookings. More recently, the RBI launched a whole set of new services, including Credit Lines on UPI, UPI Lite X – which allows to make payments even in places with bad connectivity and poor networks – and an UPI Tap & Pay functionality. Pix, in contrast, is yet in the process of launching services beyond payments, with plans to add recurring and offline payments in the near future.

Adoption 

Both UPI and Pix are the most popular payment method in their respective countries, accounting for 80% of all digital payments in India and 90% in Brazil. The sheer volume of transactions is impressive in both countries: in 2022, UPI recorded 89.5 billion transactions, while Pix recorded over 29 billion transactions. 

The growth rates are also worth highlighting: the number of transactions on UPI almost tripled over the last two years, from 4.5 billion in December 2021 to 12 billion in December 2023. During the same period, the number of transactions on Pix more than tripled, from 1.2 billion to over 4.2 billion. 

In terms of penetration, UPI is currently used by 300 million people and 500 million merchants, while Pix reached 140 million people and 11 million merchants. The sheer size of India’s 1.4 billion population, versus Brazil’s 214 million, means that UPI still has a huge potential to further expand its penetration and will likely keep its spot as the most widely used real-time payment system in the world. 

Fees

UPI today has no fees for both consumers and merchants. However, it charges an interchange fee for transactions above 2,000 rupees (about $24) completed with prepaid payment instruments such as wallets and gift cards. To promote its adoption, it is mandated that businesses with annual sales exceeding approximately $7 million adopt UPI for transactions.

Like UPI, Pix charges no fees to users. However, merchants can be charged a fee which is determined by the account/payment provider facilitating the transaction. There is also no interchange fee, meaning that the acquirer may keep the entire fee, as opposed to credit cards, whereby the interchange fee is shared between acquirer and issuer. These factors likely promoted a wide adoption of Pix among Brazilian banks, which counts approximately 800 institutions participating in the system by the end of 2023. In comparison, UPI has 500 participating banks.

Centralization of information

UPI is owned and managed by the National Payments Corporation of India (NPCI), with the oversight of the Reserve Bank of India (RBI). UPI operates as a decentralized system that utilizes domain-based addressing, wherein information associating an individual's alias with their account is stored within their service provider's database. 

Introduced in Brazil in 2020, Pix is a centralized system owned and managed by the Brazilian Central Bank (BCB), where the user data is stored in a centralized directory located at the central bank.

Fintech integration

A defining aspect of UPI is its separation of customer experience from account ownership. Users can initiate UPI payments using any bank or non-bank app, irrespective of the institution holding their account. Even non-participating fintech players can access UPI indirectly through a participant, negotiating commercial terms independently. 

Conversely, whilst Brazil's PIX system permits non-bank account issuers to directly participate, third-party initiation is an ongoing discussion which is entwined with Brazil's evolving open banking framework initiated in 2020. The present strategy leans towards the direct involvement of financial institutions providing accounts.

International expansion

As UPI has become omnipresent in India, the logical progression involves extending its reach beyond national borders. The initial impetus for internationalization stemmed from the many Indians residing abroad, seeking to send remittances back home. As a result, UPI is currently accessible in more than 10 countries, and the list continues to expand swiftly, offering millions of Indians the possibility to send remittances without fees. On the other hand, Pix is also becoming available outside Brazil, and at the moment is mostly available in Latin American countries, plus the U.S. and Portugal, with more countries to follow.

UPI showed fist the way on real-time payments and Pix followed suit. As UPI and Pix continue to gain widespread adoption and expand their service offerings, other nations closely observe their successes for potential emulation. The nuanced differences in their origins, features, and adoption rates underscore their unique contributions to the evolution of global financial services, solidifying their status as benchmarks for the future of real-time payments globally.

Sources: ACI Worldwide, NPCI, BCB, CGAP, Economic Times