We will see a lot of QR Codes for payment on the street this year, says partner at PwC Brasil

The QR Code payments industry’s race has already begun. And if a few years ago it ran into operational problems and lack of interest from the population, in 2022 its luck should change — that’s the bet of Willer Marcondes, partner at PwC Brasil, a multinational consulting and auditing company.

In December, the company released a study on the payment landscape in 2025 and 2030 worldwide. The projection is that the number of cashless transactions in cash will almost triple in eight years and go from 3 trillion in 12 months.

In absolute numbers, Africa should emerge and pass Latin America, where there is less room for growth. Asia and the Pacific remain isolated at the front, both in terms of growth and transactions.

In this scenario, alternative payment methods — via mobile phone, QR Code and even with the help of text messages — will be the protagonists.

Financial startups, called fintechs, already run in this streak seeing traditional institutions in the rearview mirror. But that doesn’t mean the big banks will cease to exist.

“Banks will continue to grow in Brazil and in the world,” says Marcondes. “But equally important players will emerge and with a product perhaps more in line with long-term trends.” It may be that the banks themselves will be able to take the lead, says the businessman, but not with the operations they carry out today.

Despite not being in the fastest growing region, Brazilians will also have to adapt to new developments. “We should see a lot of QR Codes on the street this year”, says Marcondes about a slightly closer horizon.

What would you highlight from the study? I think the first thing is the growth dynamics. Asia, which is the big market today, will consolidate in relation to the rest of the world in terms of payment volume. Africa will be the second vector of growth: it leaves the last place today and will pass Latin America in a ten-year perspective — not in per capita terms, but in the number of transactions.

But in which sector does it grow? This is the second point that the survey makes quite clear. Banks will continue to be an important player, but a competitor emerges: alternative payment methods, operated mainly by wallets [carteiras digitais]. They basically make use of two sources: instant payments and cryptocurrencies.

If you look at the industry today, the roles are very clear. The flag is in the middle. On the one hand, there is the machine company that talks to the point of sale and on the other, there is the bank that issues the card and talks to the holder, the individual or legal entity. Everyone is in their own world, explores their ecosystem and has their recipes. The alternative payment player breaks this chain because it exploits the three-way service. From the recipient, the trade and the flag. The competitive environment changes significantly.

You say that banks and traditional institutions do not necessarily lose out in this scenario presented by the research. But somehow this can happen, because today they are providing the threatened services, right? Banks will continue to grow in Brazil and in the world. When we compare what they were in 2020 and what will be in 2030, they almost double in size in Brazil and abroad. Banks and their card areas. If you ask me by 2050, the card might not exist, but in ten years it won’t.

It’s not that they won’t make money or they won’t be important, but equally important players will emerge, with a product perhaps more in line with long-term trends. Everyone is moving. Some of these will be able to occupy these spaces and others will not. It changes where to get results and where to earn money.

So the fintech sector, despite appearing saturated, still has room to grow. Talking fintech is very open. There are several cores: payment, credit, cryptocurrencies, anti-fraud solutions. In our study, we identified more than 700 people operating in Brazil, and with a very large level of coverage in the various segments.

In the credit card machine segment, several fintechs emerged, some even publicly traded, which passed the established players. Now we start to observe: is there space for all these 20, 30, 40 different little machines? An industry that is reducing revenue, has yet to find new sources of profit and is heavily dependent on card transactions when there are alternative methods like Pix? These are companies that came up with a new proposal and found a market niche, but did not find new sources of revenue and are now starting to be pressured from a valuation point of view.

On the other hand, there are several segments that are little explored. In the credit part, for example, there are still no featured fintechs. Credit remains based on the big banks. On the cryptocurrency side, banks have left a vacuum, but potentially more specialized fintechs will emerge.

I would say that all these segments that we have been observing are going through a phase of swelling until the consolidation process. It doesn’t make sense 40 machine companies or 40 types of digital accounts.

What are the consequences for society of this level of abstraction that we are going to achieve in relation to money? I wouldn’t say it’s a problem. The more you get physical money out of society, the better, in many ways. Circling money is expensive: strong car, logistics. You don’t control physical money, so there are these cases of suitcases of money, apartments full of cash boxes. In digital format it is possible to create regulatory mechanisms.

Now there are risks. We are at the mercy of new frauds, so the control mechanisms also need to evolve. That’s why one of the most important new trends that we pointed out in the study is the concern with cybersecurity and control. If the system fails, we lack an important value appropriation.

Making a parallel: WhatsApp was offline a few months ago. There was a lot of commerce that said they no longer billed, because today their billing mechanism is to sell through WhatsApp. If people start to have days down in the system, society no longer has the tools to settle their payments.

You spoke about banking in the pandemic, but in areas such as work and education, digitization was a marker of inequality. What can we do to not see this story repeat itself with virtual payments? The topic of digitization is to have infrastructure and connectivity. The first point is: people need to have the equipment that brings us the conditions of use we need. It’s not everyone’s cell phone that can make a transaction in real time, for example. The industry lacks infrastructure. We are moving towards 5G, but in several regions of Brazil not even 3G is consolidated. Having to think about alternative solutions because of connectivity problems is putting costs, adding structure to a problem that shouldn’t exist.

The second thing is this: there is an important network already established in Brazil. Sometimes we don’t give value, but you will see the number of ATM points, points of sale where you can make a transaction. It’s an important network, things need to be integrated. It’s no use thinking that new players have to be 100% mobile-based and forgetting that we have a very rich and important network that works in Brazil. It’s a super differential. We need built-in mechanisms, not just isolated ones, from cell to cell. The cell phone can read a QR code, make an approach field transaction.

And the third thing would be to work with the end consumer to understand how things work. Pix is ​​a good example of this. Why did it work so well? It is a well-established system, and the cost of a transaction for a Brazilian was high. But there was a very important factor, which was the broad engagement of the media and banks. In the end, the consumer fully understood how it worked.

We are talking about a very long period, ten years onwards. Speaking of next year, what can we expect from the updating of the financial system and capital circulation in Brazil? I would say that Pix will consolidate. It is here to stay, it will be increasingly integrated with bank slips and other payment elements.

Second thing: we should see a stronger movement in wallets, payment portfolios. Current players are important for money transactions between people, let’s start to see their solutions for capturing transactions in the offline world. We should see a lot of QR Code on the street this year.

The third is the cryptocurrency. We are going to see emerge some strong cryptocurrency mechanism in Brazil, potentially from the Central Bank itself, the Real Digital.

Finally, I would say that there will be a consolidation of credit on demand. In Brazil, we are used to paying in installments, and this is, at the end of the day, financing. Who pays is the store owner, but it is still financing. With open finance and the strengthening of credit fintechs, I think that what we call credit on demand tends to emerge. You are going to buy a product and you can either pay on the card or pay cheaper by financing directly with a fintech or partner.

X-ray

Willer Marcondes

With passages in the Accor hotel chain and the technology multinational Accenture, Marcondes is a partner at PwC Brasil, a consulting and auditing company