Fintech PagSeguro fires 7 percent of its staff

PagSeguro PagBank, a digital bank and Brazil’s second-largest acquirer in customers, on Monday announced that it is laying off 7 percent of its staff — roughly 500 employees. 

In a statement, the company told The Brazilian Report that “like tech companies and fintechs in Brazil and worldwide,” it is also making some adjustments to its structure, including layoffs “after years of continuous team growth.”

The dismissals take place two weeks after the announcement of Ricardo Dutra as the company’s “principal executive officer,” the highest role in the organization’s hierarchy, replacing Luiz Frias, who remains chairman of the PagSeguro board.

The shares of the New York-listed company have dropped nearly 58 percent in the last 12 months as the so-called “card machine war” gets increasingly fierce in Brazil. 

One of the most recent factors weighing on the sector’s revenue was the Central Bank’s decision to set a 0.7-percent cap for interchange fees for prepaid cards. The interchange fee is the charge that merchants pay card issuers (banks or fintechs) for connecting them with cardholders.

Announced in September last year, the changes will take effect from April 2023. Brazilian neobanks such as PagBank rely extensively on interchange fees for a large part of their revenue, and the change will cause them serious problems.

Besides setting a cap, the new rule also eliminates fintechs’ gains from “processing time,” also known as “floating.” Between receiving and transferring money, companies can invest funds and keep the proceeds. In the new resolution, the Central Bank ordered that prepaid operations must be settled within two business days, as is already the case with debit transactions.

An estimate by Bradesco at the time of the Central Bank’s decision suggested that PagSeguro could lose up to 3 percent of its revenue because of the new cap.

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