When people hear of Brazil, they may think of beautiful beaches, the Amazon rainforest, Carnaval, and an amazing soccer team. And while all those things are great, what investors REALLY should be paying attention to is fintech in Brazil.
Not sure what fintech is? Or want to know why Brazil is dominating the fintech market in Latin America?
Keep reading and we’ll explain everything you need to know.
Before we dive in, be sure to get the latest insights on the Brazilian fintech market and more in the Business in Brazil report!
What is Fintech?
Financial technology or fintech is a technology used to support financial services. It includes technological and software services from the financial industry.
Ever sent friends money through Venmo? Fintech.
Have you donated money to a GoFundMe campaign? Fintech.
Got paid for your services through PayPal? Fintech.
Financial technology has permeated many aspects of our digital lives, and it isn’t leaving anytime soon.
Now, let’s shine a light on Brazil and its fintech market.
Why is Brazil So Important?
Brazil is home to the largest economy in Latin America and the 9th largest in the world. It was also one of the fastest-growing economies throughout the 2000s.
Investors see many opportunities in Brazil, and this is apparent from expansions and investments from companies like Heineken, Walmart, and Amazon.
The country is a hotbed of investment right now with its growing economy and population, increased smartphone use, and thriving Brazilian E-commerce market. With these factors alone, it’s not a surprise that fintech in Brazil is one of the fastest-growing fintech markets in all of Latin America.
Fintech Brazil: The Quick Overview
As of May 2019, Brazil had the second largest number of fintech startups in Latin America at 380. Not to mention, 64 percent of Brazilians are considered fintech adopters.
Add to that, a young tech-savvy population with a median age of 32 and you get to the reason why fintech in Brazil is so successful.
This success has not gone unnoticed outside Latin America; investors see the potential of fintech in the region. For instance, the Japanese conglomerate holding company SoftBank invested millions into fintech in LATAM, a majority of it in Brazil.
Most fintech startups in Brazil deal with payments and remittances, AKA electronic money transfers.
Think of it like this: Let’s say you owe your friend some money.
Instead of signing her a check, you can use a fintech company’s app to send her the funds.
And that’s just one example.
The second-biggest category of fintech startups in Brazil is enterprise financial management.
In simple terms, it’s just managing expenses and budgeting. Fintech companies that specialize in this area help customers manage their money digitally and make it easy for them to analyze their finances.
Reasons Fintech Continues to Grow in Brazil
The increase of fintech in Brazil is not just because of the convenience of banking from your phone. Customers lack options in Brazil, and fintech is here to compete with the banking establishment.
1. High-Interest Rates at Brazilian Banks
As of January 2020, Brazil’s average bank lending rate was about 45 percent, which is amongst the highest in the world. For reference, compare that to the lending rate of the U.S at 4.75 percent. A bank lending rate is the interest rate the country’s central bank lends money to domestic banks.
High rates for local banks mean they subsequently charge their customers high-interest rates. It also doesn’t help when five banks control most of the market, leaving few options for Brazilians.
An environment like this makes it difficult for Brazilians to open accounts, take out loans, and pay them back. It leads to many not using the banks at all, let alone borrowing money.
That’s where Brazilian fintech comes in.
These startups see a need in the market and are filling it; they are offering loans and credit cards with very low-interest rates.
And Brazilians are flocking toward fintech options.
A younger population full of digital natives who easily adapt to and embrace technological advances, combined with traditional banks that give very few options, is an equation that equals success for fintech in Brazil.
2. Favorable Law Changes
In April 2018, a law was passed that allows fintech companies to loan people money without interference from a traditional bank. Before, it wasn’t so easy to get a loan from a fintech company.
Consumers would still have to go through a conventional bank, where they could potentially be denied the money anyways. That has now changed, and Brazilians can go to fintech companies for financial services at much lower rates.
By implementing this law and other regulations, the Brazilian government wants to promote competition among the banks and fintech companies for the benefit of the people.
Top Fintech Companies in Brazil
Of the over 350 fintech companies operating in Brazil, here is a list of some of the most popular and successful entities. If you have any to add to the list, please let us know!
Nubank is a digital bank that offers its customers digital accounts where they can save their money, earn interest on it, and transfer their money to whoever, whenever they want. The company also offers loans and credit cards with a reward program.
Nubank is currently valued at $10 billion, with about 22 million customers. Nubank’s CEO and founder, David Vélez, created the company after his horrible experiences trying to open a bank account in Brazil.
An online payment company that operates in many Latin American countries, Ebanx helps its customers be able to make international purchases.
For example, a Brazilian wants to buy products from a company in another country, Ebanx’s services will help them do that.
It also aims to help companies outside of LATAM receive payments from people in the region, even if the Latin American consumers only have domestic credit cards that can’t be used for international purchases. Ebanx was founded in 2012 and is worth over $1 billion.
Founded in 2012, Guiabolso is a personal finance platform that helps Brazilians understand their finances. Customers don’t have to make an excel sheet to calculate their expenses and come up with a budget. Guiabolso’s app tracks how much money its customers earn and how they spend it, like an automatic digital invoice. It also offers personalized finance tips based on their accounts.
Growing Opportunities in Brazilian Fintech
If you’re ready to expand into Latin America with your fintech venture, contact us at email@example.com. We can create the perfect market entry plan, whether it’s for Brazil, Mexico, or any other country.
And if you are dying for more insights on the Brazilian market, check out the Business in Brazil report!