The evolution of Brazil’s own instant payments system, Pix, shows how FedNow could ultimately create new opportunities for banks to make money in payments and encroach on credit cards.

FedNow, the US payments system that enables instant money transfers, 24/7, is finally here.  

The US has lagged woefully behind other countries on instant payments and, even now, FedNow will likely take years to gain widespread adoption. However, as a parallel case study, prescient experts are looking towards Brazil for an understanding of FedNow’s wider potential impacts.  

Launched in 2020, Brazil’s Pix service has gained such popularity that its usage has overtaken the volume of credit and debit card transactions, leading the country’s central bank chief to predict the impending end of credit cards. 

Instant payments allow merchants to avoid lengthy reconciliations, credit risk, and interchange fees, so businesses want customers to use Pix, and incentivize it by offering discounts or rewards that are better than what credit cards offer.  

Meanwhile, banks in Brazil are rolling out their own “Pix Credit” programs to offer their customers credit lines, giving them additional earnings opportunities by pushing into the territory of traditional credit cards. This model could play out in the US as well, driving greater competition and allowing banks to rethink how they position credit cards.  

For more on how Brazil’s example could translate to the US and why “Pix Credit shows that the race for dominance in financial services is open,” check out a recent column in American Banker.  

Other credit card threats abound as well: “Swipe fee” legislation, dubbed the Credit Card Competition Act, is currently attracting fierce lobbying as it gains backing in Washington, while pay-by-bank features are gaining steam, too.