BNPL Meets Pix in Brazil
Hey Payments Fanatic!
In Brazil, if it exists, one can probably pay for it in installments. Now, a new payment trend is taking shape—even though the Central Bank hasn’t officially launched “Pix parcelado” (Pix in installments), the market isn’t exactly waiting.
Without regulatory restrictions, banks and fintechs are already testing installment payments through Pix, effectively bringing buy now, pay later (BNPL) to the country’s instant payment system.
Pix in installments functions like a credit purchase, allowing users to split payments over time. Some transactions come with fees, while others remain interest-free, depending on the institution and the borrower’s risk profile.
Some providers, like Koin, offer interest-free plans, while others charge up to 2.99% monthly for 12-month installments.
E-commerce platforms are also embracing the model. AliExpress, through a partnership with Pagaleve, allows customers to pay in four interest-free fortnightly installments or up to 12 monthly installments.
A recent Matera survey found that over 30% of Brazilians have used Pix in installments in the past 2 months, placing it on par with revolving credit cards and ahead of consigned credit and informal lending.
If you’re interested in reading a bit about what’s been happening in Payments, keep scrolling!
Cheers,
INSIGHTS
📊 How do consumers pay in Latin America?
Here's a breakdown of the latest 2024 stats:
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GOLDEN NUGGET
Welcome to 𝐓𝐡𝐞 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 𝐀𝐜𝐚𝐝𝐞𝐦𝐲 by Checkout.com — Episode 5 👋
𝟒-𝐏𝐚𝐫𝐭𝐲 𝐌𝐨𝐝𝐞𝐥 & 𝐊𝐞𝐲 𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐅𝐞𝐞𝐬 𝐄𝐱𝐩𝐥𝐚𝐢𝐧𝐞𝐝
► Interchange fees are a critical part of card payments, representing the fee paid by the acquiring bank to the issuing bank for processing a transaction. They are set by card schemes (Visa, Mastercard, etc.) and vary based on factors like card type, transaction method, and region.
Merchants indirectly pay interchange fees as part of their total Merchant Discount Rate (#MDR), which includes:
✔ Interchange Fees → Paid to the issuing bank (Chase, Wells Fargo).
✔ Card Scheme Fees → Paid to the card networks (Visa, Mastercard).
✔ Acquirer Fees → Paid to the acquiring bank or PSP (Checkout.com, Adyen).
𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬 𝐄𝐱𝐩𝐥𝐚𝐢𝐧𝐞𝐝:
► $100 transaction
1️⃣ The customer pays $100.
2️⃣ The acquirer (Checkout.com, Adyen) deducts fees before settling the funds with the merchant. #MDR 1.57% + $0.23 → $1.80 goes to the Acquirer to be distributed across all parties.
3️⃣ Interchange fees (paid to the issuing bank, Chase, Wells Fargo) are deducted:
1.23% + $0.10 → $1.33 goes to the Issuer (deducted from $1,80)
4️⃣ Card scheme fees (paid to Visa, Mastercard, etc.) are deducted:
0.15% + $0.10 → $0.25 goes to the card scheme (deducted from $1,80)
5️⃣ The merchant receives the remaining amount: $98.20.
𝐖𝐡𝐚𝐭 𝐢𝐬 𝐭𝐡𝐞 𝟒-𝐏𝐚𝐫𝐭𝐲 𝐌𝐨𝐝𝐞𝐥 & 𝐡𝐨𝐰 𝐝𝐨𝐞𝐬 𝐢𝐭 𝐢𝐦𝐩𝐚𝐜𝐭 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬?
The 4-party model is the foundation of card payments, involving the Cardholder and:
1️⃣ Merchant
2️⃣ Acquirer (Merchant’s Bank)
3️⃣ Issuer (Cardholder’s Bank)
4️⃣ Scheme (Card Network)
𝐖𝐡𝐚𝐭 𝐀𝐟𝐟𝐞𝐜𝐭𝐬 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬?
► Card Network — Visa, Mastercard, American Express have different rates
► Card Type — Debit, credit, premium, commercial cards have varying fees.
► Transaction Type: Card Present or Card Not Present
► Merchant Category Code (MCC) — Different Industry Types
► Geography — Fees vary by region due to regulation (EU has capped interchange fees)
𝐇𝐨𝐰 𝐝𝐨 𝐌𝐞𝐫𝐜𝐡𝐚𝐧𝐭𝐬 𝐏𝐚𝐲 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐅𝐞𝐞𝐬?
► 𝐈𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐏𝐥𝐮𝐬 (IC+) → A transparent pricing structure, where merchants pay, here is an concrete example for $100:
👉 Interchange fee (Chase) → $1.33
👉 Scheme fee (Visa, Mastercard) → $0.25
👉 Acquirer fee (Checkout.com, Adyen) → $0.22
👉 Total Fees for Merchant: $1.80
👉 Merchant receives: $98.20
► 𝐁𝐥𝐞𝐧𝐝𝐞𝐝 𝐏𝐫𝐢𝐜𝐢𝐧𝐠 → A simpler, fixed-rate model where the merchant pays one flat percentage per transaction, covering everything: ~ 2.6% + $0.15
While easier to manage, blended pricing can be more expensive than Interchange Plus, as it bundles all costs into a higher flat rate.
Source: Checkout.com x Connecting the dots in payments...
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