Authors: Rubens Vidigal Neto, Allan Crocci de Souza, Fernanda Mary Sonoki, Rafaella Flores Lellis
The Brazilian Central Bank (BACEN) has recently opened a public consultation for a new ruling that will regulate the fintech credit segment in Brazil (Public Consultation No. 55/2017). The proposal sets two new types of financial institutions, the direct credit company (Sociedade de Crédito Direto – SCD) and the peer-to-peer (P2P) lending company (Sociedade de Empréstimo entre Pessoas – SEP). Even though the proposed regulation aims at the fintech credit segment, it may also have an impact on the securitization and the alternative payment methods segments.
In recent years, the Brazilian fintech credit market has grown exponentially. This growth can be explained by the improved client experience and the better terms and conditions offered by fintech credit providers to their clients, and also by the fact that such fintech firms aim at consumers that are not usually targeted by conventional financial institutions. Due to strict regulatory framework and legal limits on interest rates that can be charged by lenders that are not financial institutions, most fintech firms work with bank partners that provide loans to the firms’ customers. This business model, on one hand, helps fintech firms reduce legal risk; on the other, however, increases costs and creates inefficiencies.
