Overview:

With its estimated 1,289 startup companies, Brazil is the largest fintech market in Latin America and the fifth largest in the world. Brazil has been on a major growth trajectory in the sector. Investment in Brazilian fintech companies totaled just $52 million in 2015 and has since grown to nearly $4.5 billion in 2022. U.S. exporters interested in the fintech industry should expect ample opportunities over the coming years in the growing sector. However, companies should also prepare to familiarize themselves with the nuances of the Brazilian fintech industry as it evolves over time.

Though the overall Brazilian financial sector is highly regulated, regulation in the fintech subsector is still being defined. There have been several updates in recent years which indicate that regulatory policies will likely increase as the sector becomes more prominent in Brazil. For example, the Brazilian Securities and Exchange Commission (CVM) created an internal “Fintech Hub” in 2016 to gain market knowledge to guide future regulation. Additionally, in April 2018, the Brazilian Central Bank (BCB) issued Resolution 4,656/18, which allows fintechs to grant credit without the intermediation of a bank. The regulation also allows credit fintechs to be controlled by investment funds, which had previously been prohibited.

Within the broad umbrella of fintech, the Brazilian open banking model is also currently being defined by regulators with the support of entities such as the Brazilian Association of Fintechs (ABFintechs). In April 2019, the BCB released the main guidelines for regulating Open Banking in Brazil through Communiqué 33,455. Subsequent regulations stemming from the guidelines are expected be put into practice in phases, which makes keeping track of market changes critical for market success.

Under open banking, banks can share customer information with fintechs and financial services startups providing they have the client’s consent. This is expected to strengthen linkages between fintechs and banks and lead to individualized financial services and products. The efforts adopted by the BCB towards the adoption of open banking will increase market opportunities for e-banking, e-commerce, and attract millions of new users to the financial system.  Brazil has an estimated unbanked population of 60 million people (adults without their own bank account).

In 2020, the National Monetary Council (CMN) authorized specific fintechs to issue credit cards to the Brazilian public. These changes apply to direct credit companies (SCD) and inter-person loan companies (SEP). The CMN’s strategy at the time sought to include fintechs as new contributors of credit “in a countercyclical way” to the pandemic.

According to the Central Bank, the SCDs and the SEPs “constitute an important channel for granting credit, since they provide their services through electronic platforms and reach clients with less access to financial services.

In March 2022, the Central Bank issued additional rules for the framework regulating fintechs (specifically resolutions 197, 198, 199, 200, 201 and 202) which aim to foster competition and ease market entry for new competitors in the payments industry. The Central Bank hopes these resolutions will also encourage innovation in the industry. These rules will be effective in January 2023 and be fully implemented in January 2025.

Opportunities

Business opportunities for US fintechs to collaborate with Brazilian counterparts include the following areas:

• Payment and Remittances
• Enterprises Financial Management
• Lending
• Personal Financial Management
• Crowdfunding and Wealth Management
• Insurance (“Insurtech”)
• Virtual currency and blockchains
• Alternative scoring firms
• Trading and Capital Markets
• Digital Banks
• E-commerce
• Technologies for financial institutions
• Open Banking.

Distribution & Sales Channels

As in most other industry sectors, to be successful in Brazil, foreign service providers must either establish themselves in the country or have a local representative.

Resources

• Brazilian Federation of Banks (Febraban): https://portal.febraban.org.br/ 

Principal Business Associations

• As this sector is still in its early stages, there are few associations:
• The Brazilian Association of Fintechs (https://www.abfintechs.com.br)
• The Brazilian Association of Digital Credit (ABCD) (https://www.creditodigital.org.br/)
• The Brazilian Association of Startups (ABStartups) - https://abstartups.com.br/)

For more information, please contact US Commercial Service Industry Specialist at Patrick.Levy@trade.gov