The exponential success of Brazil's fintech sector means
that the small group of established banks in the country will
have to adapt to stay dominant. Rule changes over recent years
have paved the way for a number of new entrants to change the
status quo of banking in the country.
The central bank, which is the authority over the financial
system in Brazil, is keen to bring about competition to
New legislation allowing for open banking is expected to
pass this year or in 2021, which will have a further impact on
the banking system. Open banking means that established banks
have to open up customer financial data and banking services to
third party providers (TPP) via application programming
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"There is a big discussion about whether the big banks will
survive and how much it will cost them to open the Brazilian
market to small players," said Paulo Leme, partner at Dias
Carneiro. "The big banks are in a very comfortable
position. Six banks pretty much own the market."
"The big banks are in a very
The central bank is highly focused on bringing about
competition. It has acknowledged that there are limited
measures it can use to bring new banks to the retail space.
"The central bank has been very open to changing the regulation
for fintechs. It wants to increase competition, and will
have limited success in increasing the space for retail
– but will allow competition in other areas of
banking," said Thomaz Favarro, global risk analyst at Control
"The central bank wants to bring in more fintechs, because
they bring very positive results to the finance sector.
They’re being very open and proactive."
The view from the other side
One of the biggest players in the Brazilian fintech space is
Nubank, created in 2013. Initially offering a credit card, the
outfit recently launched an equivalent to a savings account and
is moving into asset management. Visiting Nubank's São
Paulo headquarters is somewhat like entering one of the Silicon
Valley tech unicorns.
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Since inception, Nubank has been vocal supporters of open
banking, and worked actively with the central bank –
as well as other banks – to discuss the implementation
process in Brazil.
A lot of the inspiration in open banking has come from
recent moves in the UK. "There are some concerns in the
industry about whether banks will be able to be implement open
banking efficiently, but these conversations are still
beneficial for competition in Brazil – not only for
fintechs, but also big banks," said Bruno Magrani, head of
public policy at Nubank.
Because of the way the rules are designed, the majority of
players who will benefit from data being shared through open
banking APIs are those are already part of the open banking
There are concerns that open banking is going to
'destroy’ banks because of increased competition
– but the big banks will also be able to take
Whether big banks entering the fray is likely to pose a
threat to the new wave of digital banking in Brazil is a large
debate. "We are not worried at all. We’re huge
supporters of competition," said Magrani. "We’ve
been working on trying to get more competition in to the
markets. We believe many of the things that we see in the
market in terms of the quality of services that clients have
received so far are a consequence of a lack of
Assets under management by the biggest banks in Brazil have
been decreasing. Data released in January said that the five
big banks – which once controlled approximately 75% of
total assets in Brazil – now control only 70%. In
2018, the top four banks controlled a staggering 82% of the
country's banking assets,
according to one report.
"Open banking will be huge
and very beneficial for fintechs"
Helena Lopes Caldeira, director of investor relations at
Banco Inter – a full service digital-only Brazilian
bank – agrees that regulatory changes will foster
competition and that it is a good thing overall. "The worst
thing for us is that customers still don't know about their
options. The thing we have to fight the most is banking
inertia. As for open banking, it will be huge and very
beneficial for fintechs," she added.
For Banco Inter, which already has access to Brazilian
central bank information and customer credit history, the
change is not going to be as significant. "More competition in
general is good for the market. We will benefit from other
players offering what traditional banks already do and can
offer something different."
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