In this photo illustration being displayed one hundred and two hundred reais bills and a one reais coin highlighted. The Real is the current money in Brazil.

Prolonged strike at Central Bank slows down innovation agenda in Brazil

A long-drawn-out workers’ strike at the Brazilian central bank in protest of wage increases is having an unexpected effect on the financial technology industry, as the process of new agenda releases is slowed down, and startups could face longer approval times.

Back in April, Brazil’s central bank workers voted to go on strike as double-digit inflation erupted in the country, raising fears about household income and real wages. But almost three months later, the conflict is still far from being straightened out. It is already disrupting day-to-day operations, such as publishing critical economic data releases.

This June, the bank workers’ assembly approved to sustain the strike indefinitely, a sign that the conflict is well underway. The prolonged nature of the conflict is also taking a toll on the innovation agenda, with the central bank of Brazil as one of the most significant regulatory innovators in the region.

“Due to the strike, BACEN’s very aggressive schedule of releases was reduced,” Murillo Riester, multi-acquiring product director at Fiserv. Experts argue that the conflict is chiefly bogging down further releases of PIX, the massively adopted low-cost payment system that the central bank launched in 2020 and for which it has won plaudits worldwide.

Many PIX innovations moved back to 2023

PIX, which started out as an instant payment mechanism, has reached over 120 million individual users in Brazil, more than half its entire population. It is driving a growing market share of all payments in the country. Yet, it is also an ever-evolving product, with a release agenda that includes new features with the overarching aim of expanding payments even further.

One of the features that Fiserv’s Riester still expects to be released this year is the payment initiator, a release in the software that will let merchants push notifications for the user to authorize a transaction, improving the current payment experience.

However, many of the remaining innovations of PIX that were initially anticipated for this year are likely to be postponed to 2023.

It is possible that features such as PIX Garantido – which can serve as an alternative to credit cards- and PIX International – for cross-border payments- could be put off well into next year.

Paulo Oliveira Andreoli
Paulo Oliveira Andreoli

Affecting many trenches

To be sure, the lingering strike is already affecting other trenches of the innovation agenda. An official from the central bank announced recently that pilot testing for the actual digital, the regulator’s version of a Central Bank Digital Currency, or CBDC, will be postponed to 2023.

But some fintech observers argue that beyond new releases, there are some day-to-day operations in the industry that could be disrupted.

“With the strike, both the authorization process of new institutions and queries from fintechs with new business models can take longer,” Paulo Oliveira Andreoli, a fintech advisor in Brazil, said.

“Depending on the size and activity of each company, it may require authorization from the central bank to operate, and there could also be fintechs with new business models that would like to make a consultation so as not to have problems in the future,” he added.

  • David Feliba is a Latin American business journalist with expertise in capital markets, banking, and financial technology. His work includes interviews with top executives and policymakers in the region and coverage of banking and fintech trends. He has reported from multiple countries across the Americas and has covered conferences both locally and abroad. Over the past years, his features have been frequently published in leading local and international news outlets. Some of it can be read at his personal site. He lives in Buenos Aires.

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