Fintech and Insurtech Innovation in Brazil Set to take off on Regulatory Tailwinds

Fintech and Insurtech Innovation in Brazil Set to take off on Regulatory Tailwinds

According to figures from the Brazilian Central Bank, the Pix rapid payment system-generated almost 8 billion transactions by the end of 2021. This is a huge number for a service that only began in November 2020, and it just goes to show how popular Pix has grown in the country. According to Joo Pedro Thompson, creator of fintech Z1, Pix can describe as “a government-built equivalent of Venmo.” The analogy, however, fails to reflect the fact that Pix appeals to a much broader audience than merely digitally adept teens repaying friends for coffee. Six out of ten Brazilians would not use it otherwise.

The importance of being able to pay anyone instantaneously cannot be overstated in a country where many people are still unbanked and queuing to pay bills is a daily occurrence. Additionally, Pix now offers a wider range of services, including the ability to withdraw cash from companies. Pix is an innovative institutional endeavor that is part of a larger public effort to change Brazil’s financial landscape. When we wrote about Latin America’s fintech boom, Brazilian VC Bruno Yoshimura told TechCrunch, “The Central Bank has been doing a tremendous job, and Pix is one of the most crucial structural reforms.”

Because I have lived in Brazil, this aroused my curiosity. Entrepreneurs complained a lot about bureaucracy at the time, and their best hope was that institutions would just get out of their way. VCs and founders, on the other hand, are now complimenting the Central Bank for its initiatives and prospects. “Both Open Banking and Pix will level the playing field for new challenges,” Yoshimura added, referring to another of the Central Bank’s initiatives.

It is not only Pix, and it is not just the BC# agenda of the Central Bank. The Brazilian Superintendence of Private Insurance (Susep) is working on open insurance plans, which implies insurtech could be the next industry to reap the benefits of regulatory reform. I sought out professionals with direct knowledge of Latin America’s financial ecosystem to learn more about what is going on with laws in Brazil and how it is hurting companies.

For more on insurtech, I reached out to Amy Cheetham, a partner at Costanoa Ventures, whose recent investments include Rio de Janeiro-based Plug, and Javier Santiso of Alma Mundi Ventures. On the startup side, I chatted with RecargaPay CEO Rodrigo Teijeiro and TruePay CEO Pedro Sônego de Oliveira. “The Central Bank of Brazil’s open banking efforts are clearly tailwinds for fintech innovation,” stated Costanoa’s Amy Cheetham. “As customers regain control of their data, it makes room for new entrants into the banking ecosystem and increases competition, providing consumers with better, cheaper, more equitable, and secure financial goods and services.” She explained that this involves giving fintechs the ability to construct for hitherto [underserved] or unserved sectors of the public.

RecargaPay is one of the companies that is taking advantage of the new legislation to grow its B2C services. “Our purpose at RecargaPay is to democratize mobile payments and financial services in Brazil,” stated creator Teijeiro. “Open banking and Pix are the perfect combination to help us achieve that goal.” Pix and its “amazing” journey have a special place in Teijeiro’s heart. “What was achieved in just one year was a massive disruption that benefited millions of Brazilians by making payments easier, faster, and less expensive.” The Brazilian Central Bank “deserves to be named ‘fintech startup of the year’ for this,” he said, citing Pix’s impact on cash going mobile as “a great blessing for RecargaPay.”