Startups and VCs see opportunities in open banking, finance and insurance
Brazilian Instant Payment The Pix system ended 2021 having powered more than 8 billion transactions, according to statistics from the country’s Central Bank. That’s a pretty impressive number for an offering that only launched in November 2020 and shows just how ubiquitous Pix has become in the country.
You could describe Pix as “a government-built version of Venmo,” as Z1 fintech founder João Pedro Thompson told TechCrunch. However, the analogy doesn’t fully capture the fact that Pix appeals to more than just digitally savvy teenagers paying their friends back for coffee. Otherwise, he wouldn’t be used by six of the 10 Brazilians.
In a country where many people are still unbanked and queuing to pay their bills is part of everyday life, the impact of being able to pay anyone instantly cannot be underestimated. Additionally, Pix now supports more services, such as the ability to withdraw money from businesses.
Interestingly, Pix is an institutional initiative, part of a wider range of public efforts aimed at transforming Brazil’s financial landscape. “The Central Bank has done a wonderful job and Pix is one of the most relevant structural changes,” said the Brazilian VC Bruno Yoshimura told TechCrunch when we wrote about the fintech boom in Latin America.
I lived in Brazil, so this naturally piqued my curiosity. At the time, entrepreneurs constantly complained about bureaucracy and their greatest hope was that institutions would stay away. But now VCs and founders are praising the Central Bank for its initiatives and the opportunities it has created.
“Open Banking and Pix will level the playing field for new challenges, and we expect to see a lot of innovation around them,” Yoshimura said, referring to another of the Central Bank’s projects.
It’s not just Pix, and it’s not just the Central Bank’s BC# agenda either. Brazil’s Superintendency of Private Insurance (Susep) is working on open insurance plans, meaning insurtech could be the next sector to benefit from regulatory tailwinds.
To understand what’s going on with regulations in Brazil and how it affects startups, I reached out to experts with first-hand knowledge of the Latin American fintech ecosystem.
On the VC side, I contacted Amy Cheetham, partner of Costanoa Ventures, whose recent investments include Rio de Janeiro-based Plug; and Alma Mundi Ventures Javier Santiso for additional thoughts on insurtech. On the startup side, I spoke with CEOs Rodrigo Teijeiro from RecargaPay and Pedro Sônego de Oliveira from TruePay.
“The open banking initiatives adopted by the Central Bank of Brazil are absolutely favorable to fintech innovation,” Costanoa said. Amy Cheetham noted. “As consumers take back control of their data, this creates space for new entrants into the banking ecosystem and creates more competition, giving consumers access to better, cheaper, fairer and safer. This includes giving fintechs the power to build for [underserved] or unserved segments of the population,” she explained.
RecargaPay is one of the startups to take advantage of the new regulations to expand its B2C services. “Our mission at RecargaPay,” said founder Teijeiro, “is to democratize mobile payments and financial services in Brazil, so open banking and Pix are the perfect recipe to accelerate our mission.”
Teijeiro particularly appreciates Pix and his “incredible” trajectory. “What has been accomplished in just one year has been a huge disruption that has benefited millions of Brazilians by making their payments easier, faster and cheaper. For this, the Brazilian Central Bank deserves to be recognized as the “fintech start-up of the year”, he said, describing Pix’s impact on mobile cash as “a huge blessing for RecargaPay”.