Mercado Pago, Mercado Libre‘s fintech, is now operating as a payment initiator. The payment initiator license was created by Brazil‘s Central Bank within the open banking agenda and authorizes companies to initiate payments and transfers for customers. Payment initiation allows the user to make a payment or a transfer through PIX (Brazil’s instant payments system) within the initiator’s app – in short, it is not necessary to log into the bank’s app to make PIX transactions.
That means that Mercado Pago users can transfer money via PIX from other bank accounts to their Mercado Pago account directly from Mercado Pago’s app. Previously, the customer had to go into the bank’s app to perform this operation.
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In the next phase, the payment initiator will allow users to make transactions other than PIX and to buy from e-commerces using their Mercado Pago account.
Tulio Oliveira, Mercado Pago VP, said that the payment initiator is the first step to many other possibilities of use and it transforms the online buying and selling experience.
“When paying for a purchase, the user will no longer need to copy and paste a PIX code into another bank app. Every payment is done in a process that skips some steps, making the purchase faster and easier. We also see benefits for sellers such as increased sales conversion” he said.
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Enabling PIX payments within the e-commerces app is probably the payment initiator’s big deal. Currently, Brazilians who pay on e-commerce sites and apps today using PIX need to exit the shop’s app, open the financial institution’s app and do the process of pasting the QR Code link, for example. All of this takes seven steps.
With the payment initiator, the Central Bank wants to reduce friction and cut down the payment steps to just three. This will enable the e-commerce shop itself to be a payment initiator to complete the PIX transaction within the app. It also creates more retention for merchants and fewer chances of the user giving up the transaction midway through the process. The merchant will also be able to partner with a payment initiator company.
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Payment initiators do not necessarily offer bank accounts and do not have access to users’ bank accounts. To operate as a payment initiator, it is necessary to apply for authorization from the Central Bank – both banks and technology companies, for example, can be payment initiators, as long as they are authorized by the Central Bank.
How Mercado Pago payment initiator works
When paying for purchases through Mercado Pago app, the user will see his other accounts integrated into the app. He just needs to pick which of these accounts he wants to bring the money from and authenticate the operation, either with a password or biometrics. The purchase payment is instantly concluded without the need to leave the Mercado Pago app and access the bank’s app.
The feature will be rolled out gradually until it is available to Mercado Pago’s entire base of 20.5 million unique payers in Brazil.