Latin America fintech: Brazil’s digital puzzle
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Latin America fintech: Brazil’s digital puzzle

New regulation in the pipeline to cover fintech companies; large banks wary of cannibalisation of revenues.

Brazil’s securities regulator, the CVM, has launched a study into the country’s flourishing financial technology (fintech) industry, raising the prospect of new regulations that could impede the sector’s growth. 

Sergio Furio large

Sergio Furio,

The CVM announced its initiative at the end of August and stressed that new technologies that bring efficiencies to the sector “should be supported and encouraged” but the report will also be the precursor for new regulations, potentially weakening one of the competitive advantages that fintech presently enjoys.

However, with an expensive and heavily concentrated banking system, analysts say that there remains huge potential for start-up companies to compete with the established players on cost.

Since 2014 the number of fintech companies has grown rapidly and Raphael Nascimento, associate director at Fitch in Sao Paulo, estimates there are between 150 and 170 now operating in the country.

“The large banks are still very conservative with their credit portfolios, which opens space for the fintechs to lend at lower rates of interest,” says Nascimento. “These new platforms don’t have much cost and they can be faster and less bureaucratic when approaching the market.”

The established banks have all developed digital responses to fintech – including purely online digital banks for customers.

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