Pix Automático: why exceptional UX will make it a game-changer

Pix Automático promises to revolutionize recurring payments in Brazil, but a great User Experience will be essential to maximizing its potential. 

At the time of writing this article, Pix Automático's Go Live is still four months away, and there's little to no specific data on the actual impact that any specific UX tweak will have. However, that doesn't stop us from identifying some of the likely pitfalls and thinking about how they can be addressed. This post discusses some of the UX challenges we've identified and how they can be tackled.

First of all, let's understand the transformational potential of Pix Automático

Before going into Pix Automático, let's look at some of Pix's characteristics. This is important because Pix Automático will inherit these and will have a massive headstart in comparison to other recurring payment methods:

1. 155 million Brazilians use Pix

By the end of 2020, soon after its go-live, Pix was already used by 53 million people, around 30% of the adult population. By the end of 2024, 91% of Brazilian adults had used Pix. Also worth mentioning is that 20% of mobile payment users in Brazil do not have a credit card, according to Statista Consumer Insights.

2. Pix is agnostic and mandatory

Since it is a Central Bank product, it is available on every single consumer-focused banking platform in the country. This ensures that it has maximum reach to all customer profiles. Also, a very comprehensive set of UX Guidelines ensures a consistent user experience across banks.

3. Pix is actually a great product

One might think that a government-backed product will be outdated and disconnected from current trends, but the Central Bank managed to create a product that should be a benchmark for anyone looking into payments or even pure product management.

Consumers' widespread adoption of Pix stems from several key factors, according to a survey conducted by the Central Bank of Brazil. It is secure, practical, available 24/7, easy to use, and free of charge for consumers. Take the Pix Key as an example. Instead of memorizing full bank details, consumers must know the payee's email address, phone number, or tax ID to do a Pix transfer.

In comparison, now defunct, DOC only worked during business hours, required full bank details, was more expensive, and often had a periodic cap of free transactions.

4. Pix is a cheap payment method

Both from a pure cost and a cashflow perspective, Pix is advantageous. It charges lower fees, at an average cost of 0.22% per transaction, versus 2.2% for credit cards, per a BIS study from 2022, which directly contributes to revenue increase, purely by cost savings.

Additionally, given its instant nature, businesses don't have to deal with the costs and complexities associated with anticipations and long liquidation times.

Pix Automático comes with all this baggage, which already gives it an advantage over other emerging payment methods, such as digital wallets, or well-established ones, like cards.

Why should you look out for the UX of Pix Automático?

First of all, a quick overview. Pix Automático works by establishing an authorization, achieved through an enrollment process, between merchant and customer and referencing it in every recurring payment. These authorization requests will be exposed to customers through a QR Code, exactly like payments are for regular one-time Pix.

The customer's bank can validate the payment against the enrollment and transfer funds without the need for customer interaction, given that they know the payment request has been validated and comes from a valid source.

Customers will have complete control of their Pix Automático subscriptions directly from their bank apps, being able to update transactional limits, see future payments directly in their bank statements and even cancel their subscriptions directly from the bank app.

Also, it's worth looking at what Pix Automático is not. It is not a variable frequency solution for recurrent payments. It works by following very specific billing cycles. There's a lot of misconception on this topic due to the existence of Smart Transfers, which allow for trigger based automatic transfers between accounts of the same ownership. Due to this restriction, it does not apply to payment use cases yet.

Additionally, the UK Open Banking has Variable Recurring Payments, which do allow for variable frequency payments, but there's no clear timeline for these to be implemented in the Brazilian Payment ecosystem yet. It's worth being familiar with both STs and VRPs since the future of Pix Automático indeed points towards similar solutions in the long term.

With that in mind, these are some of the optimization challenges that we, at EBANX, anticipate:

Choose wisely between fixed and variable authorizations

Say you have a streaming service that charges a fixed amount every month. At first glance, it is tempting to go with a fixed authorization, but what happens if your pricing policy changes, pricing is adjusted to compensate for inflation, or even if a user wants to upgrade/downgrade their plan?

They would have to undergo a new authorization process, which would expose that subscription to voluntary and involuntary churn. Keep that in mind when thinking about churn minimization.

When using variable authorizations, pay attention to the maximum amount of floor

This is a bit of a tricky one, so I'll go into more detail.

In creating variable authorizations, merchants can set a value called Max Amount Floor, which functions as the minimum amount a customer can set as the ceiling of that variable subscription. Here's an example of how it works:

1. A new variable authorization is created. The merchant sets its max amount floor at 100 BRL. When the customer accepts it, the customer leaves it blank. At this point, the merchant can charge the customer any amount.

2. The customer attempts to set the maximum amount of the subscription to 90 BRL. Since the max amount floor is 100 BRL, the bank app prevents the customer from setting it to 90 BRL. At this point, the merchant is still able to charge any amount to the client.

3. The customer attempts to set the maximum subscription amount to 200 BRL. Since this is more than the amount set by the merchant as the minimum accepted, this setting goes through. At this point, the merchant is able to charge up to 200 BRL. Any transaction above 200 BRL will be automatically declined.

This value can dictate the longevity of a subscription. Here are a few situations where it matters:

• Room for pricing updates: Say you know your 5-year pricing curve for a given product or service. You can set an amount floor to accommodate this curve, allowing the authorization to leave through pricing updates without having to be revisited by the customer.

• Plan upgrades: Several services offer multiple plans, such as Individual and Family plans. The maximum amount of floor that accommodates the more expensive plan allows for upgrades without the risk of having to create a new authorization.

• Seasonal price hikes: In consumption-based plans (think of a SaaS product that charges for API consumption), there can be spikes in usage that lead to a higher-than-average recurring charge. Knowing the value those spikes usually reach and setting a maximum amount floor to accommodate it ensures that conversion rates don't take a hit when payments are declined, especially since these are more outstanding sums than usual.

Now, be careful with setting it to a random high amount. Remember that this number will be displayed to the customer, and seeing it can cause them to worry about how much they might be charged and refuse the authorization altogether.

The billing cycle and first payment date matter

When creating an authorization, the billing cycle must be informed along with the date of the first payment. These two parameters determine the subscription's recurring pattern, and recurring payments must obey this pattern. Billing cycles can be weekly, monthly, quarterly, semi-annual, and annual.

In the case of an annual plan, one might be tempted to set the authorization to monthly or even weekly to achieve more flexibility and charge the customer at times other than the annual date of the yearly plan. It sounds fine on paper, but imagine the customer experience when their bank notifies them every month that the charge due to that billing cycle was not posted.

Also, the day of the first payment determines the due date for the duration of the subscription. If you set a monthly payment with the first one on the 20th, all subsequent payments must be scheduled for the 20th; otherwise, they will be declined. Knowing the usual best day to charge for your service, the one where conversion rates are higher, is key to ensuring high conversion rates for the entire subscription.

Scheduling a payment can determine conversion rates

Pix Automático recurring payments must be scheduled between 2 to 10 days before their due date. This is to ensure that the payment is shown in the customer's bank statement as a future charge. This is great to give customers visibility of payments they head ahead of them and plan to have funds in their account.

There is a double-edged sword to it, though. Schedule too close to the due date, and there's a chance of lower conversion rates due to insufficient funds. Schedule too early, and it might give too much time for customers to rethink their subscription and cancel the payment (or even the entire subscription). 

Figuring out the right time to schedule payment will be key to maximizing recurring revenue and optimizing Pix Automático's user experience.

User notifications can make or break conversion rates

Very similar to the previous item, user notifications play a critical role. Sending the correct email, a well-timed push notification, or a well-written text message (SMS, iMessage, WhatsApp, etc.) can be powerful tools to increase conversion rates. 

Keep in mind that the customer's bank can also send periodic notifications, so balancing both will be key. Flooding customers with reminders of incoming payments is never a good experience and undoubtedly leads to higher churn rates.

When bundling services, find the right mix

This one applies mainly to platforms, but I'm sure other complex business models could benefit from it.

Think of, for example, an e-learning platform that allows you to subscribe to several different courses. You can choose to create separate authorizations for each course, especially if they must be charged on different dates. Now, by setting a variable authorization, you can bundle several courses into one single subscription and even have room for new ones in the future by setting the right max amount floor.

Be careful not to put all your eggs in one basket. Remember that having a single authorization also means a user can cancel all their courses simultaneously through their bank app. Finding the right mix of a number of authorizations and services bundled will be a challenging puzzle to solve but also a very rewarding one.

The new horizon for Pix

Pix Automático has the potential to transform the recurring payments landscape in Brazil, but its success depends on a tight balance between streamlining authorization processes and minimizing churn pitfalls.

The impact of each point described above is still an open question, but I hope that this article raises the right questions to be solved ahead of Pix Automático's go-live and UX challenges.

Remember, knowing that 42 is the answer to the ultimate question of life, the universe, and everything is not very helpful without knowing what the question is. Thinking of the questions ahead of time will surely help you find out what your Pix Automático 42 looks like.

EBANX boasts diverse payment methods, with Pix holding a pivotal role in the Brazilian market.

Leveraging cutting-edge technology, our Brazilian company possesses extensive expertise in this instant payment method. Explore our Pix solutions and discover how to integrate them into your business.