Moral suasion and legal enforcement in the reform of retail payments in Brazil

Abstract

The paper presents the actions and the regulatory policy tools used by Banco Central do Brasil (BCB, the central bank of Brazil) in its efforts to modernise the Brazilian retail payments system. The paper starts by showing how the lack of legal mandate has in the past restricted BCB’s actions, notably when the only regulatory tool available was moral suasion. In 2013, BCB was granted the legal mandate to act as the regulator and supervisor of payment schemes and institutions. Since then, BCB has been using its legal mandate as a complementary regulatory tool. Despite the room for improvements in the market structure and in the conduct of participants, BCB’s actions are successfully contributing to the evolution of retail payments. It is believed that the policies options available to BCB are sufficient to guide the market towards a more efficient and safer scenario.