Brazil is the leading exporter of startups in Latin America.
Brazil’s Central Bank is probably one of the most responsible for this, as it has been the driving force behind measures that have encouraged the development of these companies and the opening of the market.
The agency has the functions of both regulator and supervisor of the financial system, which makes it possible to promote the changes required to develop the industry that combines finance and technology.
According to a Credicorp Capital report, in recent years, the agency has driven regulatory changes in favor of competition and inclusion in the financial industry, which, in turn, “has fostered the creation of numerous fintechs, with some reaching unicorn status.”
During Henrique Meirelles’ tenure between 2003 and 2011, the BCB pushed for regulatory reforms that eliminated the existing duopoly in the acquiring market, “resulting in success stories such as PagSeguro, StoneCo, and GetNet.
“Previously, acquirers Cielo (formerly Visanet) and Rede de Itaú (then Redecard) were the undisputed leaders, with annual returns on equity of more than 300%.”
It led to the fact that 48 competing companies and points of sale have increased fourfold to almost 13 million units, and the payment share has grown from 34% to 54% in just over ten years.
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As the years passed and were already in the hands of Ilan Goldfajn, between 2016 and 2019, the BC+ Agenda was launched, which had among its objectives to facilitate regulatory requirements for new market entrants.
These measures have allowed the credit participation of the five largest Brazilian banks: Itaú Unibanco, Bradesco, Banco do Brasil, Caixa Econômica Federal, and Santander Brasil, to begin to decline steadily, reaching 74% in 2020 from 80% in 2016.
The report highlights that although the figure still seems high, it is better a relevant improvement in four years, under what is seen in this same area in Mexico, Colombia, Peru, and Chile, Diego Ciconi, vice president of Buy Side Research and lead equity analyst for the financial sector at Credicorp Capital, explained in the report.
The financial body has a long way to go to decrease bank concentration.
At least since 2019, that has been focusing on inclusion, competitiveness, and market transparency, which has brought results such as Pix, the universal system of instant transfers most used for the payment of online purchases, as well as the implementation of the Open Banking model, which rules access to system user information among competitors.
“It is reasonable to expect that the market will look quite different over the next few years, given how quickly these initiatives have altered the system. Investors are betting on it,” notes Ciconi.
With information from El Economista