As some Brazilian financial institutions are charging up to 790% per year on credit card loans, Brazilian Central Bank (BCB) is opening Brazil’s market to Fintech’s. This opening movement that includes simplified legislation and lighter requirements for Fintechs has now gained new momentum with open banking. It is expected that with this new policy of sharing information between large banks with fintechs, interest rates will be more attractive to the population.
Absence of consumer credit leads Brazilians to use debit cards instead of credit cards. There are 2.3 cards per person while there are only 0.7 credit cards. E-commerce payments represents USD 1.4 billion, Brazil is the largest e-commerce market in latin America and the fourth-largest internet market in the world. A very concentrated credit market in five major banks and a huge online market creates a lot of opportunity for fintechs.
- The 5 largest banks together hold over 80% of the Brazilian market
- Credit cards 0.7 per capita
- Payments of e-commerce are 59% with card
- E-commerce market value over USD 20 billion
Open banking to BCB is “the sharing of data, products and services by financial institutions and other licensed institutions, at the customers’ discretion as far as their own data is concerned, through the opening and integration of platforms and infrastructures of information systems, in a safe, agile and convenient manner.” One of the principles is that bank details belong to customers and not to institutions.
BCB report that “participating institutions are responsible for ensuring the reliability, integrity, availability, security and confidentiality of data and services they share, as well as for meeting customer demands and supporting other participants.” API developers will be able to provide external integration services between banking platforms for data sharing upon the client’s authorization.