Brazil, the main creator of FinTech startups in Latin America

In recent years, the Central Bank of Brazil has promoted regulatory changes in favor of competition and inclusion in the financial industry”.

Credicorp Capital

Brazil is the main exporter of startups in Latin America and the Central Bank of that country is probably one of the main culprits for this, given that it has been the promoter of measures that have fostered the development of these companies and the opening of the market.

The body has both regulatory and supervisory functions of the financial system, which allows it to promote the changes that are required to develop the industry that combines finance and technology.

According to a report by Credicorp Capital, in recent years the organization has promoted regulatory changes in favor of competition and inclusion in the financial industry, which in turn “has fostered the creation of numerous FinTechs, with some of them reaching unicorn status.

During the mandate of Henrique Meirelles between 2003 and 2011, the BCB promoted regulatory reforms that eliminated the existing duopoly in the acquisition market, “resulting in success stories such as PagSeguro, StoneCo and GetNet. Previously, the acquirers Cielo (formerly Visanet) and Rede de Itaú (then Redecard) were the undisputed leaders, with annual returns on capital of more than 300 percent”.

This caused that there are currently 48 companies competing and the points of sale have increased fourfold, to almost 13 million units, and that the payment participation has grown from 34% to 54% in just over 10 years. Digital payments, mass use of smartphones and preference for applications: what the expansion of e-commerce in the region is showing

Over the years and already in the hands of Ilan Goldfajn, between 2016 and 2019, the BC+ Agenda was launched, which had among its objectives to facilitate regulatory requirements for new market participants.

These measures have allowed the participation in credits of the five most important Brazilian banks, which are Itaú Unibanco, Bradesco, Banco do Brasil, Caixa Econômica Federal and Santander Brasil, to begin to decrease steadily, reaching 74% in 2020 from 80 % in 2016. The report highlights that although the figure still seems high, a relevant improvement in four years is better, under what is seen in this same area in Mexico, Colombia, Peru and Chile, explained in the report Diego Ciconi, vice president of Buy Side Research and leading equity analyst for the financial sector of Credicorp Capital.

To reduce banking concentration, the financial institution must go a long way. At least since 2019, which has been focusing on market inclusion, competitiveness and transparency, which has brought results such as Pix, the most widely used universal instant transfer system for paying for online purchases, as well as the implementation of the Open Banking model. , which regulates access to system user information among competitors.

“It is reasonable to expect that the market will look quite different in the coming years, given how quickly these initiatives have disrupted the system. Investors are betting on it”, highlights Ciconi.