Google, Amazon, Apple and Facebook are a regulatory challenge, says Central Bank of Brasil

June 15, 2020
Repórter especial na Agência Estado.
📷
cn.reuters.com
BC banking stability report pointed out concerns about the big techs' rapid entry into the Brazilian market.

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Bigtechs are entering the Brazilian financial market quickly and represent a 'big challenge' for regulation, highlights the Central Bank in a Banking Stability Report (REB), published on Thursday (4 ). They are technology giants such as Apple, Google, Facebook and Amazon and have started to operate with financial products and services, opening a new competitive front for banks.

Unlike new entrants, who start small, bigtechs have a large consumer base, easy access to information and robust business models. "These differences can be a big challenge in regulating bigtechs in relation to banks", evaluates the BC, in the bank stability report.

The monetary authority sees the arrival of bigtechs as a way of adding efficiency gains to the Brazilian financial system and also promoting social inclusion. However, he ponders that the heavyweights of technology will also bring new and complex trade-offs (choices) between financial stability, competition and data protection.

Bigtechs have entered the market first through the means of payment sector. Then they move on to loans, insurance and other financial products. According to the BC, these groups have acted in two ways, directly or in partnership with financial institutions.

For BC, the rapid development and scale growth of fintechs presents major challenges for regulators around the world. "The answer, still in the initial stages, is coming in an innovative way, but it is too early to assess whether all risks are being addressed," says the monetary authority.

One of the great tests will come from the crisis generated by the pandemic of the new coronavirus, which should increase the default rate, weighing, mainly, for newbies who operate in credit. In addition, the turbulence made fintechs' funding lines more difficult and more expensive, whose business model is leveraged and depends on rounds of fundraising.

BC issued two resolutions to support fintechs and startups

In this sense, the BC has issued two resolutions to support the newcomers. In addition to allowing the fintechs to issue credit cards, it allowed them to operate lines from the National Bank for Economic and Social Development (BNDES). The deadline for the public call for the selection of credit funds for micro, small and medium-sized companies, which will have an investment of R $ 4 billion, ended yesterday (3), but was extended until June 10.

The Brazilian market had more than 600 startups intensive in the use of digital technology in June last year, according to the Radar FintechLab, mentioned in the bank stability report. The number represents an increase of 33% since the last survey, made in 2018.

The BC states that it continues to analyze various scenarios for the future organization of the financial system and to monitor its transition. “The opportunities created during this transitional innovation process are better used - and their gains are better distributed - if the regulator's performance is neither inhibitory nor permissive”, he concludes.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Latam Fintech Hub, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la platafomra. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.

Bigtechs are entering the Brazilian financial market quickly and represent a 'big challenge' for regulation, highlights the Central Bank in a Banking Stability Report (REB), published on Thursday (4 ). They are technology giants such as Apple, Google, Facebook and Amazon and have started to operate with financial products and services, opening a new competitive front for banks.

Unlike new entrants, who start small, bigtechs have a large consumer base, easy access to information and robust business models. "These differences can be a big challenge in regulating bigtechs in relation to banks", evaluates the BC, in the bank stability report.

The monetary authority sees the arrival of bigtechs as a way of adding efficiency gains to the Brazilian financial system and also promoting social inclusion. However, he ponders that the heavyweights of technology will also bring new and complex trade-offs (choices) between financial stability, competition and data protection.

Bigtechs have entered the market first through the means of payment sector. Then they move on to loans, insurance and other financial products. According to the BC, these groups have acted in two ways, directly or in partnership with financial institutions.

For BC, the rapid development and scale growth of fintechs presents major challenges for regulators around the world. "The answer, still in the initial stages, is coming in an innovative way, but it is too early to assess whether all risks are being addressed," says the monetary authority.

One of the great tests will come from the crisis generated by the pandemic of the new coronavirus, which should increase the default rate, weighing, mainly, for newbies who operate in credit. In addition, the turbulence made fintechs' funding lines more difficult and more expensive, whose business model is leveraged and depends on rounds of fundraising.

BC issued two resolutions to support fintechs and startups

In this sense, the BC has issued two resolutions to support the newcomers. In addition to allowing the fintechs to issue credit cards, it allowed them to operate lines from the National Bank for Economic and Social Development (BNDES). The deadline for the public call for the selection of credit funds for micro, small and medium-sized companies, which will have an investment of R $ 4 billion, ended yesterday (3), but was extended until June 10.

The Brazilian market had more than 600 startups intensive in the use of digital technology in June last year, according to the Radar FintechLab, mentioned in the bank stability report. The number represents an increase of 33% since the last survey, made in 2018.

The BC states that it continues to analyze various scenarios for the future organization of the financial system and to monitor its transition. “The opportunities created during this transitional innovation process are better used - and their gains are better distributed - if the regulator's performance is neither inhibitory nor permissive”, he concludes.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y solamente sus autores son responsables de ellas. No reflejan ni comprometen el pensamiento o la opinión del equipo de Latam Fintech Hub y, por lo tanto, no pueden interpretarse como recomendaciones emitidas por la plataforma. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista en el ecosistema Fintech.
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