Skip to content

Financial System Infrastructure in Brazil Emerging Technologies Analysis

Emerging Technologies

The Brazilian Financial System Infrastructure (FSI) is actively exploring and integrating several emerging technologies that are poised to significantly impact its various value chain stages in 2024 and 2025 and beyond. While Open Finance and instant payments like Pix have already transformed parts of the ecosystem, newer advancements in Artificial Intelligence (AI), Distributed Ledger Technology (DLT), and the pilot project for a digital real (DREX) represent the next wave of technological disruption and opportunity.

Artificial Intelligence (AI) is being leveraged within the FSI primarily to enhance existing operations and risk management capabilities. While not a standalone infrastructure component, AI acts as a powerful tool to analyze vast datasets, automate complex processes, and provide deeper insights. The provided document mentions AI being used to enhance fraud detection, a critical function within the Payments Processing and Risk Management stages. Beyond fraud, AI has the potential to optimize trading algorithms, improve credit scoring in Origination, personalize customer experiences, and streamline back-office operations across clearing, settlement, and custody.

Distributed Ledger Technology (DLT), the underlying technology behind cryptocurrencies, is being explored for its potential to create more efficient and transparent financial market infrastructures. DLT can facilitate peer-to-peer transactions without intermediaries, potentially impacting traditional models of clearing, settlement, and custody. While full-scale adoption is still some time away, its exploration signifies a move towards potentially disintermediated or more streamlined processes in the post-trade landscape.

DREX, the Brazilian Central Bank's digital real pilot project, is a specific implementation of DLT focused on tokenizing the national currency and financial assets. DREX aims to facilitate transactions with digital assets and smart contracts within a regulated environment. This initiative has the potential to fundamentally alter the Settlement stage by enabling instant, atomic (simultaneous) exchange of tokenized assets against tokenized central bank money. It could also impact Origination and Structuring by enabling the issuance of new types of tokenized securities, and Custody and Registry by providing a new digital format for holding and recording ownership of assets.

The ongoing Cloud Migration, while already in progress, continues to be a critical technological trend enabling the adoption of these emerging technologies. Cloud infrastructure provides the scalability, flexibility, and processing power necessary for deploying AI models, operating DLT nodes, and building agile, API-based solutions required by Open Finance and other innovations.

These emerging technologies, along with the continued evolution of API-based solutions driven by Open Finance, are not only modernizing the technology layer (Stage 10) but are also creating ripple effects and opportunities for disruption and efficiency gains across the entire FSI value chain in Brazil.

Emerging Technology Potential Value Chain Impact Industry Opportunities Industry Challenges
Artificial Intelligence (AI) Risk Management: Enhanced fraud detection, improved credit risk assessment, better market surveillance. Payments Processing: More sophisticated fraud prevention, personalized payment experiences. Origination & Structuring: Optimized underwriting, better client profiling. Trading & Execution: Algorithmic trading improvements. Technology & Innovation: Development of AI-powered financial solutions. Improved operational efficiency and cost reduction. Enhanced risk management capabilities. Development of innovative, data-driven financial products and services. More personalized customer interactions. Need for significant investment in AI infrastructure and talent. Data privacy and governance concerns. Ethical considerations and bias in algorithms. Regulatory clarity on AI usage in finance. Human-capital shortage in AI expertise.
Distributed Ledger Technology (DLT) Settlement: Potential for faster and more efficient settlement processes (e.g., atomic settlement). Custody & Asset Servicing: New ways to hold and manage digital assets. Registry: Immutable and transparent record-keeping. Origination & Structuring: Issuance of tokenized assets. Trading & Execution: Potential for new trading platforms for digital assets. Creation of new financial markets and products (tokenized assets). Increased efficiency and reduced counterparty risk in post-trade processes. Potential for greater transparency and auditability. Lower operational costs in certain functions. Regulatory uncertainty and the need for clear legal frameworks for DLT and digital assets. Interoperability challenges with existing legacy systems. Scalability and performance limitations of current DLT platforms. Cybersecurity risks specific to DLT.
DREX (Digital Real Pilot) Settlement: Facilitates instant and atomic settlement of tokenized assets against digital currency. Custody & Asset Servicing: New form of digital money to be held and transferred. Origination & Structuring: Enables issuance of assets settled on DREX. Payments Processing: Potential for new payment use cases involving tokenized money. Development of a sovereign digital currency. Potential for increased efficiency and innovation in financial markets through programmability (smart contracts). New opportunities for financial institutions and fintechs to build services on DREX. Requires significant infrastructure development and adaptation by participants. Cybersecurity risks associated with a digital currency. Ensuring interoperability with existing payment and settlement systems. Public adoption and education.

References

  1. Banco Central do Brasil. Infraestruturas do Mercado Financeiro. https://www.bcb.gov.br/estabilidadefinanceira/infraestruturasmercado
  2. Banco Central do Brasil. Sistema de Pagamentos Brasileiro (SPB). https://www.bcb.gov.br/estabilidadefinanceira/sistemadepagamentosbrasileiro
  3. Banco Central do Brasil. Sistema Especial de Liquidação e de Custódia (Selic). https://www.bcb.gov.br/estabilidadefinanceira/selic
  4. Agência Gov. PF e sistema financeiro ampliam vigilância sobre saques no segundo turno. https://www.gov.br/pt-br/noticias/financas-e-impostos/2024/10/pf-e-sistema-financeiro-ampliam-vigilancia-sobre-saques-no-segundo-turno
  5. Conjur. Infraestruturas de mercado financeiro: invisíveis, mas essenciais. https://www.conjur.com.br/2024-jul-10/infraestruturas-de-mercado-financeiro-invisiveis-mas-essenciais/
  6. IT Forum. Tendências de tecnologia para o mercado financeiro. https://itforum.com.br/tendencias-de-tecnologia-para-o-mercado-financeiro/
  7. JOTA. Os 9 anos do marco legal e regulatorio de registradoras e depositarios centrais. https://www.jota.info/opiniao-e-analise/artigos/os-9-anos-do-marco-legal-e-regulatorio-de-registradoras-e-depositarios-centrais-08062022
  8. FEBRABAN Notícias. Pix é o meio de pagamento mais usado no Brasil em 2023; TED lidera em valores transacionados. https://quantoplan.febraban.org.br/noticias/pix-e-o-meio-de-pagamento-mais-usado-no-brasil-em-2023-ted-lidera-em-valores-transacionados
  9. Finsiders Brasil. Quantidade de pagamentos digitais cresce 31% no primeiro semestre. https://www.finsiders.com.br/noticias/pagamentos/quantidade-de-pagamentos-digitais-cresce-31-no-primeiro-semestre-do-ano/
  10. Instituto Propague. Pix eleva movimentacao via iniciação de pagamento a nivel recorde. https://institutopropague.org/noticias/pix-eleva-movimentacao-via-iniciacao-de-pagamento-a-nivel-recorde/
  11. Dimensa. Tecnologia Bancaria: Desafios Na Adocao E Principais Tecnologias Usadas. https://dimensa.com/blog/tecnologia-bancaria/
  12. Matera. SPB: o que voce precisa saber sobre o Sistema de Pagamentos Brasileiro. https://blog.matera.com/sistema-de-pagamentos-brasileiro-spb/