Business

Brazilian fintechs will be allowed to issue credit cards

The National Monetary Council tries to increase the flow of resources to individuals and small companies in the midst of the coronavirus crisis

Brazil is the 5th largest global destination for investments in fintechs. Photo: Shutterstock
Photo: Shutterstock
Ler em português

Brazilian National Monetary Council decided that the country’s fintechs will be allowed to issue credit cards as an alternative source of revenue. The move is an attempt to increase the flow of resources to individuals and small companies in the midst of the coronavirus crisis, informs Valor Econômico.

The authority also said the country’s fintechs will be able to obtain funding from state-owned development bank BNDES, as their usual financing channels have dried up due to coronavirus-linked market tensions.

READ ALSO: LABS coverage on the coronavirus and its impacts

The measures derive from requests that had been made by fintechs themselves. However, representatives of the sector and banks heard by Valor consider that, although positive, the initiative does not attack credit risk, which has been the biggest obstacle to the granting of credit in recent weeks.

Private equity

Reuters reported that the monetary council also said that private equity funds will now be allowed to control fintechs working as digital lenders but only indirectly. Brazil’s central bank has traditionally restricted the ability of private equity funds to buy financial institutions.

Brazilian fintechs such as SoftBank-backed lender Creditas, payments company Stone and MercadoLibre’s financial unit Mercado Pago, normally finance their businesses mainly through securitization deals in the capital markets.

In a statement, the authority said that fintechs are able to reach small entrepreneurs and even unbanked individuals, and may help the government implement public policies.