Entry of fintechs will increase competition in the exchange sector and benefits in 2023

Regulatory updates promoted over the last few months in the exchange and benefit markets, with the authorization for fintechs to enter the sector, should cause important changes in both, with increased competition and potential positive impacts for the end customer from 2023 onwards.

This is the assessment of Bruno Balduccini, partner in the banking and financial transactions area at Pinheiro Neto Advogados.

He states that, under the new foreign exchange law, approved in December 2021, fintechs classified as payment institutions (IP) by BC (Central Bank) will be allowed to operate in the foreign exchange market from July 2023.

Buying and selling currencies, making remittances abroad and offering accounts in foreign currency or abroad are among the services that fintechs will be able to offer.

With the entry of a series of financial companies that make intensive use of technology in their operations, starting to compete with traditional institutions that, in many cases, still carry a legacy of systems that cause bureaucracy and slowness, the tendency is for a significant increase in competition within the sector, says Balduccini.

He adds that fintechs that will have the prerogative of offering foreign exchange services to customers need to be classified by the Central Bank’s rule as an issuer of electronic money, postpaid payment instrument (credit card) or acquirer of means of payment.

This is the case, for example, of names like Nubank, PicPay, Neon, PagSeguro and Mercado Pago.

“In theory, these are fintechs that could operate in the exchange market with the regulatory changes brought about by the new law, but it is a decision that will depend on the business strategy of each one”, says Pinheiro Neto’s lawyer, who already has received inquiries from some fintechs interested in starting exchange activities next year to better understand the rules to which they will be subject.

Balduccini adds that, as they have a lower capital requirement compared to large incumbent banks, a requirement that serves as a kind of liquidity cushion to deal with possible market stress situations, fintechs will still be subject to a limitation of up to US$ 100 thousand (R$ 520 thousand) per transaction.

The Pinheiro Neto partner says that, more broadly, the new foreign exchange law revoked a series of old rules relating to control requirements imposed on financial institutions, bringing about a simplification of the regulatory framework.

“The objective is to reduce bureaucracy and make the process more intelligent, eliminating a series of registrations that had to be done through several different systems, which was a remnant of the past”, says the specialist.

The exchange legislation was dispersed in more than 40 laws and other provisions and also seeks to adapt Brazil to the recommendations of the OECD (Organization for Economic Cooperation and Development).

New model should reduce concentration in the benefits market, predicts expert

The benefits market is also pointed out as a potential niche in which fintechs should start to gain more and more space starting next year.

Balduccini cites Decree 10,854 of the federal government, approved in November 2021, which brings important changes to the way the benefits market works in the country.

Concentrated in the hands of large companies such as Alelo, Sodexo and Ticket, the sector grew under a model known as a closed arrangement, in which each company formed its own network of commercial establishments that accept payment for meals only through cards issued by the respective companies. .

According to Balduccini, the dynamics can be compared to the model that existed until a few years ago in the country in the card market itself, in which a certain brand was only accepted in a specific payment machine.

“By this model, what happened was that those who had their own network were protected, making it difficult for new entrants to arrive”, says the Pinheiro Neto partner.

In recent years, fintechs began to emerge that began to operate in the niche of benefits, such as Flash and Caju, which, instead of creating their own network of commercial establishments, began to issue cards with the Visa and Mastercard flags, in a well-known model. as an open arrangement.

“The decree legalized the practice of these new benefit companies, generating concern among the large companies that run the risk of losing market share”, says the expert, adding that the rule provides that the current contracts would have their conditions maintained for a period of up to 18 months. , ending, therefore, in May 2023, when the dispute between incumbents and new entrants tends to intensify.