Since the legal framework that allowed the emergence of payment institutions (PIs) in 2013, the number of license applications to operate with this modality has been growing. Since then, 239 applications have been filed with the Central Bank (BC), of which 149 have been decided - currently, 62 companies have authorization to operate as IPs.
The tendency is for this number to grow substantially in the coming months. Currently, there are 90 applications under analysis by the Central Bank. Most (51) are for becoming an IP in the form of electronic money issuer, which allows the management of prepaid payment accounts - the case of many fintechs that were born and have developed in recent years.
The remaining 39 applications to operate as an IP are divided among applicants to become payment transaction initiators, the so-called ITPs - in all, there are 10 institutions in the queue. There are also five companies applying to become issuers of postpaid instruments, for example, non-financial institutions that wish to issue credit cards.
And finally, the list of applications includes 24 "hybrid" applications, i.e., that intend to be an electronic money issuer associated with one of the other three modalities (issuer of post-paid payment instrument, ITP or acquirer). The data was presented by Carolina Bohrer, head of the Financial System Organization Department (Deorf) of the Central Bank, in an event at the law firm Barcellos Tucunduva Advogados (BTLAW), last Friday (4).
"We are starting to see an acceleration of pleadings for ITP, which are linked to the evolution of the Open Finance agenda," Carolina said. "It was a process advanced by WhatsApp Pay and now we see more interest because of Open Finance. We have relevant players entering, both national and big techs," she cited.
Finsiders has been closely following the growth of this market, still in its early stages. Recently, banks such as Mercantil do Brasil, Inter e XP announced payment initiation functionalities. Currently, 14 institutions are able to operate the service, which is part of phase 3 of Open Finance. The group ranges from large banks such as Bradesco, Itaú, and BTG to fintechs such as Mercado Pago, Celcoin, and Gerencianet.
At the same time that the list of requests to act as ITP is growing, the director of Deorf, from BC, calls attention to the absence of requests from institutions to become accreditors, for example. "We don't have any new requests for accreditation. It is a market that is already quite saturated, and making money with it is no longer something simple."
The incentive to competition is one of the flagships raised by the Central Bank from the so-called Agenda BC#, which includes innovations such as Pix, Open Finance, the regulatory sandbox, and the digital real future (the Brazilian CBDC), among other initiatives.
"What we have seen, because of the competition pillar of the BC# Agenda and the development of the market itself with IPs and credit fintechs, is a very relevant volume of new institutions," said Carolina. According to her, there is an evolution of "traditional" IPs, adding new services, as well as a growing movement of "embedded finance", with companies from different sectors creating their IP licenses or even credit fintechs, mainly Direct Credit Societies (DCS).
"We have seen an increase in demand from companies that already have IPs and want to add SCD," she exemplified. "The [phenomenon] of 'embedded finance' brings challenges that make us reinvent the wheel every day," she said, citing that authorization to become a regulated institution is just the beginning of the process. "It's a relationship that we want to be long-lasting."
In her speech, Carolina also mentioned that the monetary authority is studying the possibility of extending the deadline for payment institutions that issue electronic currencies to apply for authorization to operate.
Currently, the rule states that all payment institutions engaged in this activity must submit the request for operation until March 31, 2023 at the latest. On the other hand, IPs that issue postpaid instruments and acquirers must continue with the need to request operating authorization only after reaching a volume of R$500 million in transactions within 12 months.
At the event, Giancarllo Melito, a lawyer specialized in means of payment and fintechs and partner at Barcellos Tucunduva (BTLAW), highlighted the importance of the Central Bank's clarifications in front of an audience composed mostly of fintechs. "There are still many doubts about volume, deadlines and other regulatory aspects. The signaling of a postponement of the deadline for electronic money issuers is positive," he said.
Embedded finance
In her speech, Carolina mentioned some business models that have been gaining space in the financial sector, which is increasingly multiple and disputed by various players. One of the examples are the complete digital ecosystems (super apps), which aggregate payment activities, digital accounts, cards, loans, investments, insurance, cell phone plans, marketplace, and delivery. "It's what we've been calling a non-banking multiple institution," Carolina said. Examples include Ame, PicPay, banQi, Inter, among others.
Another case is that of electronic money issuer with the activity of subcreditor. These are institutions that offer, for example, payment accounts for receivables credit, ERP solutions, and products and services for niche businesses, such as distribution chains. BEES Bank, of Ambev, is an example of this. Another, which has just received SCD authorization, is Natura &Co Pay, the cosmetics company's financial services unit.
Two other movements that are gaining strength, as Carolina mentioned, are banking as a service (BaaS) and payment institutions that are evolving their service platform, adding new functions such as credit, investments, insurance, marketplace, and crypto - this last product, through partners.
New rules for IPs
In March of this year, the Central Bank published the new prudential rules for PIs. In short, it determines that IPs will have rules that are proportional to their size and complexity. The set of rules will come into effect in January of next year, but full implementation will take place in January 2025.
Under the new rules, prudential conglomerates will be classified into three types:
- Type 1: prudential conglomerate led by a financial institution;
- Type 2: prudential conglomerate led by a payment institution and not composed of a financial institution or other institution authorized to operate by the Central Bank; and
Type 3: prudential conglomerate led by a payment institution and integrated by a financial institution or other institution authorized to operate by the Central Bank.
*Report updated with more information about the rules for IPs.
Source: Finsiders