BC studies rule that can make fintechs’ no-annuity cards unfeasible | Economy

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BC declared that it will analyze the financial market proposals and then take it to the board

A proposal for a regulatory change made by the Central Bank (BC) puts fintechs and large banks on opposite sides, once again. And the impact could be billions: according to a survey by Zetta, an organization that brings together several fintechs such as Nubank and Mercado Pago, if these new rules were in effect last year, the customers of these financial institutions would have paid around R$ 24 billion in fees.

The rule change could limit the business model of financial start-ups that have grown by offering free services such as credit cards.

This new chapter in the dispute involves a change in the Interchange Fee (TIC), a percentage paid by card brands to issuers (financial institutions), which would put under the same ceiling the fee charged on transactions made by cards issued by fintechs and by banks.

Funding with ICT is among the main sources of revenue for fintechs and, according to the companies, allows them to offer other services for free.

The division began when the BC decided to set a 0.5% ceiling on ICT for debit cards in 2018. At the time, the institution argued that the measure was intended to encourage the use of this type of payment in the country.

This change ended up differentiating the fees paid to banks and fintechs because the cap does not apply to their products. The reason is simple: fintechs, for the most part, do not issue debit cards, but prepaid cards, which, although falling under a different regulation, have very similar uses.

Now, the BC can establish the same ceiling for debit and prepaid cards, reducing, in practice, the collection of fintechs. The Zetta study was premised on a ceiling of 0.6% for ICT last year, similar to the 0.5% limit for debit cards established by the BC in 2018 and now being considered for prepaid.

The Brazilian Federation of Banks (Febraban) presented a document in the public consultation opened by the BC in October 2021, in which it said it was against any pricing, but understood that the proposal would bring a “more isonomic” treatment between agents, that is, a symmetry between the regulations.

Defense of self-regulation

The Brazilian Association of Credit Card and Services Companies (Abecs), which brings together large banks and fintechs, does not see “two sides” in the discussion and advocates a solution through self-regulation.

Milene Fachini Jacob, partner in the fintech, crypto and blockchain area at BLuz Advogados, explains that in BC’s view, there is an asymmetry for consumers.

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“The Central Bank said: I did a study and I’m trying to eliminate market asymmetries and also the impact that this has on the final consumer. I identified that debit and prepaid have the same premises and therefore I will use the same principles in both markets”, he says.

In the first week of June, representatives of Zetta met with the president of BC, Roberto Campos Neto, to defend that this ceiling would harm fintech operations and presented the calculation of the impact on tariffs.

In addition to the argument that the ceiling would directly affect the business model, Zetta presented Campos Neto with arguments that a possible change could make it difficult for people to access banking services.

“When we take the universe of companies that are part of Zetta, we would be looking at something like 34 million people who would no longer have access to the financial sector in the next two years because of this reduction”, argues the president of Zetta, Bruno Magrani.

Ricardo de Barros Vieira, executive vice president of Abecs, said that the card brands have already submitted proposals for self-regulation to the BC.

“We are proposing that, if the BC sees any imperfection, that an eventual price adjustment be made by the flags and not by state pricing”.

Sought, the BC informed that it is analyzing the contributions it received from the market and that the proposal will be submitted to the BC board “soon”.

If the Central Bank goes ahead and decides on the new regulation, Zetta asks for an “extended” time for the market to adapt. In the analysis of Leandro Vilarinho Borges, partner in the banking and means of payment area at Velloza Advogados Associados, the possible change should affect the fintech business model.

“Maybe for some there is room to create other sources of revenue and soften the impact of this change, but perhaps for others this remuneration is so essential that the business model makes no sense without freedom in the tariff”.

In the view of Vieira, from Abecs, the question of the adaptation period should also be decided by the market and he stressed that the association defends a balance with self-regulation, free competition and equality of rules.