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Tech Roundup: Is Brazil ready to ditch printed money?

. Jul 10, 2020
digital money physical money Image: Slowdown99/Shutterstock

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: Brazil’s transition from printed to digital money is harder than it looks; the HR tech landscape in Brazil; Facebook’s crackdown on fake accounts across Latin America. 

Transition to digital currency is harder than it looks

In the Covid-19 world, printed money can be a health hazard.

In South Korea, the government went as far as <a href="https://www.reuters.com/article/health-coronavirus-southkorea-money-idUSL4N2AZ1TL">burning cash</a> and taking custody of banknotes as a precaution. In Brazil, digital payment channels accounted for 74 percent of transactions made by individuals&nbsp;—&nbsp;a jump of 10 percentage points from pre-pandemic days.</p> <ul><li>Banning physical banknotes in favor of digital money, however, is easier said than done. Over 45 million Brazilians still <a href="https://agenciabrasil.ebc.com.br/geral/noticia/2019-08/brasil-tem-45-milhoes-de-desbancarizados-diz-pesquisa">don’t have a bank account</a>.&nbsp;</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3138802" data-url="https://flo.uri.sh/visualisation/3138802/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Paradox. </strong>Despite hygiene issues, the amount of banknotes circulating in Brazil actually peaked to a record 8 billion bills during the pandemic. There are two main reasons for the phenomenon: (1) the BRL 600 coronavirus emergency salary <a href="https://g1.globo.com/economia/noticia/2020/05/28/com-auxilio-emergencial-papel-moeda-na-economia-bate-recorde-em-abril.ghtml">forced</a> the <a href="https://brazilian.report/business/2019/09/09/privatization-alone-save-brazilian-mint/">Brazilian Mint</a> to print an extra BRL 9 billion in May; (2) people didn&#8217;t have anywhere to use their money — as most shops were closed.</p> <ul><li>The Central Bank also believes many Brazilians have stockpiled physical money as emergency savings.</li></ul> <p><strong>Cultural issue. </strong>According to Rodrigo Miranda, co-founder and chief technology officer at fintech Zoop, companies now have the challenge to build a digital culture in Brazil. A lack of technology and high costs are no longer an obstacle for the widespread adoption of digital payment methods, as <a href="https://brazilian.report/power/2019/05/13/brazil-hotspot-fintechs/">fintechs have increased their presence</a> in the country.&nbsp;</p> <ul><li>“People have smartphones in the countryside, but culturally, the owner of a grocery store does not use digital money. TV and YouTube have helped in building more awareness, but to breach that barrier you have to speak their language. Our strategy is using local partners in remote areas of Brazil to help us establish dialogues with potential customers,” he told <strong>The Brazilian Report.&nbsp;</strong></li></ul> <p><strong>Regulation. </strong>Mr. Miranda sees the technological advances pushed forward by the Central Bank as a step in the right direction. <a href="https://brazilian.report/business/2019/04/30/open-banking-brazilian-customers/">Open banking</a> and the official instant payment system PIX will certainly encourage digital payments. He believes the market will make an effort to adopt digital solutions and eventually end the use of printed currency, as digital transactions open up more opportunities for companies and customers. They are also easier for the government to track and, therefore, to tax.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Meet Brazil’s HR Techs</h2> <p>As companies shifted to remote working practices in Brazil, human resources teams were forced to adapt their processes, such as assembling entirely remote <a href="https://economia.estadao.com.br/blogs/radar-do-emprego/novos-contratados-fazem-integracao-100-remota-em-tempos-de-pandemia/">hiring</a> and firing systems, or finding ways to manage teams at a distance. The biggest winners in this trend are Brazil&#8217;s so-called &#8216;HR Techs,&#8217; the human resources startups that have gained traction in the country. As we reported in our May 15 Tech Roundup <a href="https://brazilian.report/tech/2020/05/15/tech-companies-leading-brazils-transition-to-remote-work/">HR tech Gupy raised BRL 40 million</a> during the pandemic. Now, a report by think tank Distrito gives a broader view on the sector.</p> <p><strong>Profile. </strong>Out of 373 selected companies, 43 percent were focused on talent management, 28 percent on recruiting, and 25 percent on what the report classifies as &#8216;HR Core&#8217; — comprising systems managing key personnel information. Also, 68 percent of companies’ business models are B2B, while 20 percent work with both B2B and B2C models. Following the pattern perceived in other startup segments, 73 percent of HR techs are based in Brazil&#8217;s wealthy Southeast region.</p> <p><strong>D&amp;I.</strong> Despite being the sector that manages diversity and inclusion in companies, HR Techs are scarcely diverse themselves.<strong> </strong>On average, each company has between two and three partners from São Paulo, mostly in their 40s. Only 21 percent of the partners are women.&nbsp;</p> <ul><li>Still, the sector is more inclusive than others, such as fintechs — a field in which women occupy only 12 percent of management positions.</li></ul> <p><strong>Investments. </strong>Since 2014, USD 473 million were invested in Brazilian HR techs; so far, in 2020, nine deals raised USD 27 million. Last year marked a peak for the segment, with Gympass becoming a unicorn and fundraising for HR techs amassing 11.6 percent of all investments in Brazilian startups over the 12 months.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Facebook cracks down on misinformation networks in Latin America</h2> <p>Social media giant Facebook Inc. shut down hundreds of profiles, groups, and pages on both its namesake social media brand and Instagram all over Latin America this week. Facing heat from advertisers for allowing the spread of hate speech on its platforms, the company is making a push to curb “coordinated inauthentic behavior.”</p> <p><strong>Why it matters.</strong> Social media has become a major vector of misinformation —&nbsp;and a threat to democracy.</p> <p><strong>Brazil.</strong> The investigation reached the presidential palace — with researchers tying the misinformation network to a <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/09/trust-brazil-post-reopening-recovery-amazon/">special advisor to President Jair Bolsonaro</a>. Five current or former advisors to Mr. Bolsonaro’s three politician sons were also linked to the accounts.</p> <ul><li>Meanwhile, the center-left Workers&#8217; Party had nine WhatsApp accounts banned for suspicious activity. Four of them were reportedly <a href="https://www.uol.com.br/tilt/noticias/redacao/2020/07/07/whatsapp-bloqueia-contas-do-pt-flagrado-por-disparo-em-massa-de-mensagens.htm">reinstated</a>.</li></ul> <p><strong>Latin America.</strong> In El Salvador, Argentina, Uruguay, Venezuela, Ecuador, and Chile, auditors found foreign-backed accounts designed either to back or trash local governments.</p> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li><strong>5G. </strong>As we reported in our <a href="https://brazilian.report/newsletters/brazil-daily/2020/07/10/huawei-excluded-brazilian-5g-bid-queiroz-bolsonaro-child-mortality/">July 10 Daily Briefing</a>, Telecom Italia — parent company of mobile operator TIM — has excluded Chinese telecom company Huawei from a tender for 5G equipment for the core network it is preparing to build in Italy and Brazil. The move occurs despite the fact that TIM’s initial 5G tests in Brazil have been using Huawei equipment.</li><li><strong>Glitch. </strong>Fintechs Nubank and PicPay blamed state-owned bank Caixa for a glitch that saw clients&#8217; money “disappear” from their accounts. The mistake was reported in transfers involving the BRL 600 coronavirus emergency salary. Caixa said it did not identify any such mistake. Per the bank&#8217;s <a href="https://www.correiobraziliense.com.br/app/noticia/economia/2020/07/09/internas_economia,870821/caixa-responde-nubank-sobre-auxilio-nao-existe-sumir-dinheiro.shtml">Technology VP</a>, some clients used bank-issued invoices twice, which led Caixa to sign a “double transaction” warning that may have caused the issue. Nubank <a href="https://link.estadao.com.br/noticias/empresas,caixa-afirma-que-nao-identificou-falha-em-seus-sistemas-por-transferencias-para-nubank-e-picpay,70003357831">reported</a> that customers have already had their balances reinstated.</li><li><strong>Research.</strong> In the wake of the oil spill that affected Brazil’s Northeastern coast, the Science and Technology Ministry launched a new program to support research evaluating its impact on ecosystems, fishing activities, and how to provide bioremediation — techniques to diminish environmental damage using natural assets. The Ciência no Mar Program will allocate BRL 3.95 million to such projects and will receive bids until August 21.</li><li><strong>Telephony.</strong> Requests for mobile number portability have halved in Latin America during the pandemic, <a href="https://www.telesemana.com/blog/2020/07/08/pedidos-de-portabilidad-numerica-cayeron-a-la-mitad-por-la-pandemia/">according to</a> specialized website Telesemana. Both Brazil and Argentina reported a 48-percent drop in carrier changes from 2019 levels. In Chile, changes plunged by 40 percent in April. The trend may be down to phone companies in many countries requiring customers make these requests in person, but it may also be explained by increased indebtedness across the region. Only customers with no outstanding debts are allowed to switch their numbers to other operators, and many clients have opted to pay their bills in installment plans during the pandemic.</li><li><strong>Venture capital. </strong>Argentinian Startup accelerator CITES has <a href="https://www.infobae.com/economia/2020/07/08/lanzan-un-fideicomiso-por-usd-24-millones-para-financiar-desarrollos-cientificos/">launched</a> a USD 24 million venture capital fund to invest in areas such as nanotechnology and biotechnology, in partnership with Sancor Seguros and Banco de Valores. Sancor is expected to provide 70 percent of the funding, but the Inter-American Development Bank has already put USD 3 million into the initiative.&nbsp;&nbsp;&nbsp;&nbsp;</li><li><strong>Fundraising.</strong> Digital brokerage Warren raised BRL 120 million in a funding round led by QED Investors. The company already has BRL 2 billion in assets under custody, and aims to reach BRL 10 billion by the end of 2021. Unlike <a href="https://brazilian.report/business/2020/06/29/xp-itau-feud-exposes-need-for-investment-regulations-in-brazil/">banks or traditional brokerages</a>, their model charges customers — not companies — for the products offered, in an attempt to increase transparency in wealth management.

 
Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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