Brazil - Interoperability of ATMs

There are twenty-one ATM networks in Brazil, mostly single bank networks. Cards are the predominant payment instrument used in Brazil, with the card market being the second largest in the world. Despite improvement over the years, there is a low level of interoperability among networks of ATMs in Brazil, contributing to high operational costs for the banking sector and increased costs for customer. The committee on payments and market infrastructures (CPMI) defines ‘interoperability’ as the technical or legal compatibility that enables a system or mechanism to be used in conjunction with other systems or mechanisms. The interoperability between ATM networks is accordingly quite low, with the exception of the Banco 24 Horas network. The joint World Bank- IMF financial sector assessment program (FSAP) of 2018 recommended for the Banco Central do Brasil (BCB) to pursue full interoperability of ATM. The interoperability of payment systems/ infrastructure is critical for positive network externalities and for facilitating financial inclusion. networks in Brazil. Following the FSAP and the policy dialogue with BCB, this note aims to provide key policy options for BCB with respect to achieving interoperability for ATM transactions in Brazil. The note presents: (i) the key concepts that impact interoperability of the ATM network; (ii) an overview of the regulatory framework and retail payment infrastructure in Brazil; (iii) cross-country examples of interoperable ATM networks; (iv) issues and challenges to be addressed for achieving interoperability; and (v) the possible policy options that the BCB could consider adopting in Brazil. In conclusion, it is recommended that BCB takes a series of policy measures starting with using the tool of moral suasion to encourage the stakeholders towards achieving full interoperability of the ATM infrastructure in Brazil.