What started as a small financial startup movement in São Paulo has morphed into a major player in Brazil’s financial sector. And although the majority are still concentrated in the nation’s economic capital, you can now find scores of them in Rio de Janeiro, Belo Horizonte and Florianópolis. We’re talking about fintechs, the startup movement that’s been turning Brazil’s traditional banking system on its head. From 40 fintechs in 2014 to 130 in 2015 to 244 in 2016, the rate of growth is astounding.
In its September 2016 Financial Report, Brazil’s Central Bank included a special section on fintechs, where it highlighted the role that fintechs have had in creating new, innovative banking solutions. The report also credited fintechs with offering services at lower costs and reaching segments of the population that are largely neglected by traditional banks.
It’s not just Brazil’s Central Bank that has taken notice of this growing industry. In May of 2016, Marketers That Matter awarded Nubank, a Brazilian fintech, with its prestigious marketing award. Nubank was the first Latin American company to get the award, and it follows in the path of companies like Google, Visa, and GoPro.
With their size and impact growing, regulation has become a question on everyone’s mind. Different governments have handled the question of fintech regulations differently. For example, the U.S. has put tight restrictions on them; the EU, and particularly the U.K., have been relatively liberal. Up until this point, Brazil has neglected to include fintechs in its banking regulations.
A recently created organization called ABCD (Associação Brasileira de Crédito Digital) seeks to protect and promote fintechs and their values of transparency and simplicity. Other similar groups have formed to discuss how to regulate the fintech industry without creating the traditional obstacles associated with the financial services sector in Brazil.
Brazil’s Central Bank along with the Securities Commission (CVM) have been in discussions with these newly formed groups to talk about appropriate regulatory measures. In a prescient move, the Central Bank has already been researching ways to construct accountability policies for fintechs with various startups and lawyers over the past two years. For its part, CVM is predicted to issue crowdfunding rules later this year and has hinted at introducing more general regulatory action shortly.
