Digital businesses must keep growing despite forecasts for economy in 2022, says PagSeguro

Although the prospects for the growth of the Brazilian economy in 2022 have been progressively deteriorating in recent weeks, digital businesses that have been benefiting from the increase in digitization in the population’s habits should maintain a resilient growth pace.

This is the assessment by Luiz Frias, founder and chairman of the board of directors of the financial services and payment means company PagBank PagSeguro, which belongs to Grupo UOL – which has a minority and indirect stake in Grupo Folha, which edits the sheet. Frias is also the newspaper’s publisher.

“The company [PagSeguro] it has grown around 50% per year in recent years, and macroeconomic discussions do not affect our operation that much,” said the executive during PagSeguro Day, adding that the company should deliver new growth in the region of 50% in 2021.

In his opinion, the effort that has been made by big banks in recent years to rival the fintechs has not been very successful.

Banking concentration in Brazil has been falling, but it is still high. The five largest hold around 70% of the country’s credit supply, which represents a great opportunity for fintechs, said Frias.

“A concentrated, non-digital financial market is a huge opportunity for disruption by new digital competitors like us,” said the founder of PagSeguro. “I’ve never been more confident about the company’s future than I am today.”

According to Frias, part of the optimism with the prospects for the business is due to the potential of the digital banking front through PagBank, which points to an addressable market more than 20 times greater than that of acquiring PagSeguro.

At the end of September 2021, the digital bank reached the mark of approximately 12.2 million active users —an 83% growth year-over-year—, with around 1 million investor customers and approximately 2 million corporate accounts.

Frias said that, over the next two years, PagBank should reach around 35% of Nubank’s total customer base, which represents approximately 14 million customers, considering the competitor’s reported figure of 41 million in June 2021, and a growth of approximately 15%, compared to September.

In addition, PagBank’s revenue, Frias estimated, will be around 15% that of Nubank in two years — Nubank’s financial intermediation revenue reached the mark of BRL 4 billion in the first half of the year, which leads to a estimated value for the operation of the digital bank PagBank of around R$ 600 million.

In the third quarter, PagBank’s revenue was R$240 million. The estimate given by Frias corresponds, therefore, to an expansion of approximately 150%.

In any case, the operation of PagSeguro, pointed out the president of the company, Ricardo Dutra, has also shown good results in 2021.

He said that, between the months of October and November, in five days, the company’s machines registered an average of R$ 1 billion daily in financial transactions.

The company recorded recurring net income of BRL 418.7 million in the third quarter of 2021, according to a balance sheet released last week.

The company’s result represented a growth of 26.7% compared to the R$ 330.4 million obtained in the same period last year.

The numbers were driven by the 85.8% growth in the volume of payments and financial transactions processed, which reached the mark of R$125.6 billion.

According to the company, the quarter’s results are related to the movement of diversification of revenue sources, mainly from strategies aimed at micro-entrepreneurs.