Brazil to Cap Prepaid Card Interchange Fees to 0.7% Starting April 2023

central bank brazil, caps, prepaid cards, interchange fees

The Central Bank of Brazil (BCB) is set to cap interchange fees for prepaid cards starting in April 2023, and it will also standardize the settlement term for debit and prepaid card transactions.

Reuters reported Monday (Sept. 26) that the limit will be 0.7% for interchange fees for prepaid cards. The BCB said the changes are expected to “increase the efficiency of the payments ecosystem, encourage the use of cheaper payment instruments, enabling the reduction of costs for stores to accept these cards.”

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The central bank put the issue out for public consultation last year, but the feedback came back with a suggested cap of 0.5% for both debit and prepaid cards, a change that would have been more of an upset to FinTechs than the current 0.7%.

Interchange fees for debit cards currently are from a joint weighted average calculation of 0.5% and a maximum value per transaction of 0.8%, Reuters reported. Under the revisions by the BCB, debit card interchange fees will now be capped only by 0.5% per transaction.

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Banks in Brazil had been asking the BCB to level the field by setting a limit for interchange fees for prepaid cards. The rise in FinTechs operating without fee caps gave them an unfair advantage, per the report.

Brazilian FinTech Nubank told Reuters that 7% of its revenue in the year to June 30 came from interchange fees on prepaid cards. If the cap had been in effect, the challenger bank’s revenue would have been affected by 2.9%, Nubank said.

Nubank shares were down 2.3% in midday trading when the news broke about the fee caps, according to the report. Shares of Brazilian payments company PagSeguro Digital fell 9.5%, and Inter & Cofell was down 9.8%.