Business

Card machines market in Brazil faces drop in investment

Companies in the card accreditation sector aim mainly at SMB - a group strongly affected by the corona crisis

Card machine and smartphone
Photo: Shutterstock
  • The mood among investors is bearish due to the current crisis and card machine companies are struggling to raise funds;
  • The Brazilian government considers alternatives to help accreditors to get funding.

Companies in the card accreditation sector are struggling to raise funds to offer as prepayment of receivables or as credit for customers, as informed by Valor Econômico newspaper. Due to investors’ sentiment, even when they get financing, the cost is too high.

These companies aim at micro, small and medium entrepreneurs, an audience strongly affected by the economic consequences of the pandemic – sales to some segments dropped by 70% in the two weeks of quarantine. For this reason, the federal government is considering alternatives to help accreditors to obtain funding in this period, including the offer of discount lines, according to the Minister of Economy, Paulo Guedes.

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Another initiative analyzed by the government is to grant credit through the card machines. Public banks could make this viable, with resources from the Treasury, a model in which banks and creditors use the card payment history to release credit to customers, and the installments are charged as a percentage.

“The market is out of liquidity and the cost of funding for sub-creditors has increased by 10%. Many of them are experiencing difficulties,” a source declared to Valor. The lack of funding faced by the accreditors causes a ripple effect, since they pass on part of this volume raised for the sub-accreditors – companies that pay for the use of the accreditation system to provide the service in some regions/sectors – to anticipate for their customers.