an article written by David Vélez, Founder and CEO, Nubank
Since the beginning of the COVID-19 pandemic, around 16 million people have been enfranchised into the Brazilian financial system. In fact, the increased migration to online services during this period means 85% of Brazilians now have access to financial services.
This represents one of the highest increases in the banked population in decades.
Despite this improvement, there are still barriers to digital payment adoption — but some of Brazil’s promising FinTech companies are looking for the solution in collaboration with other actors.
Nubank, founded in São Paulo in 2013, is today one of the largest digital banking platforms in the world, offering financial products to more than 53 million customers. More importantly, recent data shows that Nubank has opened access to the financial system for 5.6 million people who had never previously had access to banking services.
But innovation alone cannot carry the mantle of financial inclusion — governments must assist in this effort.
Government policies or regulations can, in fact, create barriers to entry for payment providers or new players trying to innovate in the market. Onerous licensing requirements, capital requirements, domestic processing and data restrictions are adopted by many countries in an effort to enhance security, control costs, or address privacy concerns, but may have the unintended consequence of creating market access barriers.
Some countries, however, have managed to avoid this. The Brazilian Central Bank has done an excellent job encouraging the entry of new institutions through proportional regulation, for example.
In Brazil, the pro-innovation regulatory landscape allowed digital banks to leverage new technologies, which have been critical for the growth in financial inclusion seen during the pandemic. However, that is not the case for every LAC country, especially for micro, small and medium enterprises (MSMEs).
One study found out that merchant onboarding processes are one of the main obstacles for the inclusion of 80% of MSMEs in the formal economy, and the reason they remain informal.
Another catalyst for financial inclusion through digital payments in Brazil was the introduction of Pix, a real-time payment system launched in 2020 by Brazil’s Central Bank.
Pix allowed over 40 million people to make their first ever bank transfer. Between November 2020 and March 2022, the number of Pix users skyrocketed from 41 million to over 124 million, and a recent report by the Bank for International Settlements (BIS) found that Pix had the fastest adoption curve amongst all surveyed real-time payment systems in the world. The system is now widely used to pay for social welfare programs such as CadUnico and Bolsa Familia.
Pix has shown how the creation of real-time payments infrastructure can be an important tool for Central Banks to foster financial inclusion in the region.
To further develop digital payments, governments and the industry must adopt new technology to help modernize payments.
Credit foto: Reuters/Paulo Whitaker
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
