The fact that infrastructure is a central prerequisite for modern economic systems is nothing new. Everyone knows: without well-developed transportation networks, no industrial nation can function. 

The same applies to payment systems. A functioning payment infrastructure – as we have long had with cash – is essential for every economy. Time and again, it has become clear that it is advantageous for an economic system when the basic infrastructure is provided by the state or state-affiliated institutions. 

The key here is basic infrastructure – not less, but also not more. For example, the Eurosystem ensures the supply of cash but does not – and rightly so – operate its own ATMs. 

Just as with cash, a central infrastructure can also be a crucial success factor in digital payments. 

Pix – A Success Story from Brazil 

Since the end of 2020, the Central Bank of Brazil has provided market participants with Pix, an infrastructure for digital payments – open to all types of payments and channels of the digital age. 

Usage is growing rapidly, among both consumers and merchants. The reason: Pix works without intermediaries and without card networks. As a result, the system is extremely cost-effective for users, while also being fast and efficient. 

Today, Pix processes around 76% of all banking interactions in Brazil, clearly surpassing both cash and card payments. Every market participant can develop their own business models based on the Pix infrastructure – independently of other payment service providers. 

With Pix, Brazil has created an infrastructure that brings significant benefits to both the population and the economy. For large, previously dominant providers like Visa, Mastercard, or PayPal, this has meant substantial losses in transaction volume. 

Pix as a Model for Europe? 

Unfortunately, there is still no real understanding of digital payment infrastructure at the European Central Bank (ECB). The ECB’s approach to the introduction of instant payments – specifically TIPS – already showed that it does not grasp the infrastructure aspect well, or needs more time to do so. 

With the digital euro, another problem is emerging: the ECB plans to offer additional services beyond the provision of the basic infrastructure. This would amount to an inappropriate market intervention. 

It would make more sense to provide the foundational infrastructure centrally, while leaving the development of additional services to private market participants. 

Perhaps the ECB is indeed more of a regulator than a creator. 

Wero – A Ray of Hope for Europe? 

To compensate for the ECB’s shortcomings, the European Payments Initiative (EPI) was launched – supported by numerous European banks. With Wero, it has now introduced its own payment system: initially as a person-to-person (P2P) solution, with the goal of offering further digital payment functions in the future. 

For now, market share and adoption are still modest. Merchants and customers first need to be convinced. On top of that, Europe faces typical challenges: complex regulation, fragmented markets, and the dominance of global players. 

Lesson from Brazil: Infrastructure is What Matters 

Pix shows impressively what many large payment providers are reluctant to admit: 

• A centrally orchestrated, state-backed infrastructure creates speed, security, and trust. 

• It gives private providers room to innovate and thus promotes growth across the entire industry. 

A strong, open, and state-supported payment infrastructure can therefore become a decisive engine of economic development – as can be seen in Brazil, and potentially in Europe as well. 

Contact us for more information at infomail(at)alseda.com