A new fintech revolution could unlock cheap credit for SMBs in Brazil

Boosted by pro-innovation regulation, Brazil has become a worldwide benchmark for financial inclusion in the last two decades. Now, another big change is underway, concerning the valuable trail of the card industry: card receivables.

Unlike PIX, the instant payment system entirely developed and controlled by the Central Bank, the development of the card receivables market is pretty much in the industry’s hands. But the monetary authority’s standardization, interoperability, and transparency requirements have been forcing this market to open up to new players — which creates new opportunities.

In 2019, new resolutions allowed merchants to use the balance of POS terminals (the track record of transactions in card machines) as collateral for loans in different institutions and fintechs. Until then, merchants could only use this information to get money from banks (issuers) with whom they worked or the owners of the card machines (acquirers) that provided the devices for them. In other words, it was a closed market.

New resolutions issued last November by the Central Bank and the National Monetary Council (CMN) aim to clean up the 2019 regulations and are likely to accelerate change. As issuers and acquirers struggle to find ways to operate in the new environment, fresh players emerge, creating new uses for card receivables that make payment and lending services for entrepreneurs, especially small-to-medium-sized businesses (SMBs), more accessible. 

They all have a lot to gain. 

After posting a record financial volume of BRL 2.6 trillion (USD 502 billion) in 2021, the card industry in Brazil was expected to grow 21 percent in 2022, to BRL 3.2 trillion, according to Abecs, the association representing acquirers and electronics payment companies.

The final figure for 2022 is yet to be confirmed, but as a whole this market is expected to...