10/10/2022

Brazil's Pix Is A Great Example For Future Messaging Apps Interoperability

Pix is an undeniable success. Don’t know what I’m talking about? Launched in October 2020, Pix is Brazil’s instant payment system based on phone apps and Internet Banking, largely adopted by the majority of Brazilians since then.

Brazil’s Central Bank, the “father of Pix”, maintains an updated page on its website showing the Pix evolution according to lots of metrics.

It is an impressive sight:

• In less than two years, almost 130 million (>50%) people and just over 11 million companies have made at least one transaction with Pix.
• This audience has created more than 500 million “Pix keys” — shortcuts to facilitate Pix transfers. A Pix key can be a phone number, an email, a national ID (and its equivalent for companies), or a random number.
• Close to BRL 1 trillion (~USD 200 billion) was moved in 2.2 billion transactions — the majority, 68%, between individuals (P2P).

Financial institutions adhered to Pix unconditionally, even though they lost the (little) revenue they had with similar, more archaic methods of electronic money transfer, such as “TED” and “DOC”. Today, almost 800 of them support Pix.

And despite the magnitude of the system, Pix has shown itself to be agile in implementing new features, such as withdrawals, changes and recurring payments, and to make adjustments due to unforeseen events, such as flexible value ceilings to inhibit nighttime robberies.

Is it perfect? No, but it is way better than anything that existed before and that showed up later, such as WhatsApp Payments. More than that, Pix is an example to the world. Bank for International Settlements (BIS), which is developing a similar system for cross-border payments, praises the Brazilian Pix.

Pix began to be developed by the Brazil Central Bank in 2014 with an open model for dialogue, consisting of a discussion forum, working groups and even an open source repository on Github.

It is true that Brazilian banks, despite all the power they have, shrink next to the biggest companies in Silicon Valley, such as Meta, Apple, and Google. Even so, they are really powerful and yet were all in. For all these reasons, Pix can be a reference to another conundrum that we face on a daily basis: the multiplicity of messaging applications.

In the first half of this year, the European Union advanced the Digital Markets Act (DMA), a new law created to curb the unbridled power of American big tech and restore competition in the sectors in which these companies operate.

Among other requirements, the DMA demands for interoperability between messaging apps made by big companies. iMessage will have to talk to WhatsApp, and both will have to talk to… whatever Google’s messaging app is at the moment.

It seems as unlikely as it was in Brazil until 2020 to transfer a few bucks, free of charge and instantaneously, between rival banks accounts on a Sunday night. Difficult? Certainly, but not impossible.

And although difficult, it is not unprecedented. At the beginning of the coronavirus pandemic, Apple and Google teamed up to create an API for tracking contagions. On Tuesday (4), the Matter standard, which creates a “common language” for Internet of Things devices and has Apple, Google, Amazon and Samsung among its members, was finalized.

For messaging, we need a “common language” that understands the basic functionality of this kind of app, such as exchanging messages, creating groups, and making calls. The rest — stickers, reactions, mini-apps, etc. — is up to each application. These would be the differentiators.

A common base for messaging apps would approximate the functioning of this market to that of music streaming, but without the commercial barrier (the agreements with the record labels that allows them to stream millions of popular songs). Spotify, Deezer, Apple Music, and Tidal compete not in catalog/content, but in features, apps, and integrations.

There are already open protocols that enable interoperability between messaging applications, such as XMPP and Matrix. What is lacking is good will, which it seems we will only get from the big companies thanks to a little push from state regulation in Europe. May this path lead to a result as good as our Pix.

Discuss @ Hacker News.