How Brazil became the new hotspot for fintechs

Brazil’s banking system is known for its distortions: a large concentration that paves the way for huge spreads, higher fees, and poor services for customers. An environment where big players have so much power does not seem particularly welcoming for new companies, but fintechs have been able to benefit from the blind spots left by market leaders to become one of the largest startup segments in Brazil—and new regulations are set to boost it even further.

Data provided by the Fintech Mining Report 2019, elaborated by the intelligence unit of innovation company Distrito, estimates that in just three years, an average of almost seven new fintechs opened every month in Brazil, with the sector amounting to 550 companies as of May 2019. According to Brazil’s Startups Association (ABStartups), the financial services segment takes up nearly 4 percent of Brazil’s 12,106 startups, making it the third largest sector.

But the companies’ ability to provide amenities big banks cannot is not the only explanation for the rise. According to Gustavo Gierun, Distrito’s co-founder, a mix of available funding, the search for more efficient alternatives amid the economic recession and properly-applied regulation has provided fertile soil for these companies to develop in the country.

“Innovation and technology benefit from crisis because people are willing to save. And some sectors are more attractive in Brazil than others; financial services have a lot of funding available. When you have...