Brazil is a nation of magical realism and vibrant communities, yet also of political corruption and economic unrest. Brazil is the largest country in Latin America - both in landmass and population - and holds an influential position on the global stage. After the United States, Brazil tops the list of total Facebook, Twitter, and YouTube users. Moreover, there are more mobile devices in the region than human inhabitants.
Regardless of the current state of affairs, the financial technology (fintech) sector is booming in Brazil. According to Finnovista, Brazil is the largest fintech hub in Latin America with over 188 new startups in the past 18 months. The industry has grown to capture the attention of giants such as Goldman Sachs, Sequoia Capital, and Visa. With the current regulatory structure, economic standings, and political scene in Brazil, the Brazilian fintech industry is on course to become an unstoppable global force.
Why is Fintech Booming in Brazil?
The major banking crashes in the 1980s and 1990s caused Brazil to place heavy regulations and controls on the banking industry, which in turn, have created stability as well as hurdles for any financial startups in the nation. According to Bruno Ramos de Sousa, senior associate at the Veirano Advogados law firm, five major banks hold around 84% of all loans and 90% of retail branches in the country; yet, 35% of Brazilians above the age of eighteen do not have a bank account. Finnovista reports that “consumers often find themselves with very negative customer experiences, significant barriers and impediments, such as extremely high annual percentage interest rates, which can go up to 450%.”
Despite the numerous hurdles, there has been a huge upsurge in fintech. As of May 2018, there are 377 fintechs in Brazil dealing with payments, investment, insurance, financial management, blockchain, and more. Ceres Lisboa, senior vice president of Moody’s Investor Service adds that "lenders are also attracted to digital banking because they see opportunities to reduce costs as Brazil's economy remains weak after a protracted recession.” Amid political corruption and scandal, and thanks to modernization and the rise of the Millennial generation, Brazil’s fintech ecosystem has become the most fertile in Latin America.
Who are Brazil’s Biggest Players in Fintech?
Launched in 2014, Nubank aims to fight complexity and help people gain control of their finances. The fintech startup began its payment card operations offering no-fee digital savings accounts, unlimited peer-to-peer transactions, and no-fee transfers to any bank in Brazil. In June 2018, NuBank exceeded four million credit card customers and reached 1.5 million digital accounts. Most recently, the company announced that their products are available to any Brazilian with a smartphone. It now has the largest customer base of any digital bank globally outside of Asia.
Founded in São Paulo in 2014, Pagar.me attempts to create diverse payment solutions while helping to make all types of payment accepted on the Internet. The company has the best API in the market and enables businesses to use major credit cards such as Visa, MasterCard, HyperCard, Diners, and AMEX.
Formerly known as BankFacil, the digital credit platform focuses on secured loans and has over 3.5 million customers. Inspired by the fact that Brazilian consumers paid over 200% interest rate on consumer loans, Creditas was born. The company operates through a banking-partner model and specializes in collateralized loans. Creditas had a $135 million loan book last year is projected to grow 30-fold in the next three years.
As the leading mobile personal finance platform in Brazil, GuiaBolso has over four million users of their #1 finance app in the App Store and customer credit marketplace. The credit marketplace was launched later in 2016 and offers personal loans from partner banks. GuiaBolso has plans to improve their app and further expand their credit offerings and product line to include investments and credit cards.
Based in Brazil, Ebanx is a cross-border payment processing firm connecting e-commerce merchants across Latin America. Recently, Ebanx raised US$30 million to develop more projects. Some of Ebanx’s primary partners include Airbnb, AliExpress, Spotify, and Udacity.
The Future of Brazilian Fintech
With international investments and help from Brazil’s central bank, there’s no turning back for fintech in the region. Finnovista estimates that if the current market behavior continues the fintech sector could produce up to $24 billion in profits within the next 10 years. Furthermore, in June Octavio Damaso, director of Brazil’s Central Bank, expressed the bank’s strong commitment to fintech and noted that, “a new regulation would lead to a further development of the ecosystem within a legal framework.” Outlooks for the industry remain positive; however, entrepreneurs hope for more legal regulations (similar to the Mexican law approved in March) to ensure prosperity. Brazilian fintech should remain on the radar as it continues to capitalize on its popularity and success.