The Brazilian Central Bank has floated a proposal that would let FinTechs lend money but which would also curtail them from taking deposits, as might be seen in a traditional commercial banking relationship, according to news by Reuters.
The proposed rules would, in part, find precedent in the United Kingdom, with what has been known as the “sand box” approach, where FinTech regulation has been defined by, as Reuters put it, simplified rules that are adjusted even as the industry evolves. The Latin American nation, should the proposals be accepted, would allow commercial banks to create FinTech platforms.
In Brazil, the rules are on track to have a public hearing, though they would not be subject to congressional approval. That is the assessment of Brazilian Central Bank Head Otávio Damaso, who was quoted by Reuters as stating that the new system would boost access to financial services without injecting additional risk into the financial service industry itself.
Amid that backdrop, the FinTech sector has grown rapidly across the Brazilian economy, with the number of players in that arena growing by several multiples (as noted by Reuters, six-fold). The tech-focused FinTech platforms have been able to charge interest rates that are lower than might be seen in the traditional banking sector — as low as a quarter to one-half of the rates that are levied by banks.
As noted previously, and in a Goldman Sachs report, there are more than 200 FinTechs in Brazil, with a possible revenue profile of roughly $24 billion slated through the next decade. The banking sector is a concentrated one, where the top five banks disburse a vast majority of loans in the country, to the tune of 84 percent.