The ultimate guide to Brazil fintech
Strategy Note / Global

The ultimate guide to Brazil fintech

  • Latin America’s leading fintech hub has a well-diversified, profitable ecosystem and is a centre for anti-fraud know-how

  • Popular fintech strategies include tech investment, developing strategic partnerships and entering new customer segments

  • Key constraints are market size and growth, the long-term impact of Covid-19 and distribution capacity

Rahul Shah
Rahul Shah

Head of Financials Equity Research

Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Tellimer Research
23 November 2020
Published byTellimer Research

This 16-page report continues our series on the risks and opportunities in the world's key fintech markets. We analyse Brazil by drawing on the results of three detailed proprietary surveys we conducted in the country of 15 fintechs, 8 incumbent firms and 100 consumers, allied to desk research into a total of 424 local fintech firms.

Some of our key findings:

  • The Brazilian fintech ecosystem is well-diversified, with a strong cluster of anti-fraud expertise.

  • Brazil’s fintech scene is sophisticated, and profitability levels are above the global EM average.

  • Competitive pricing, operational efficiency and effective targeting of financially-excluded customers has helped firms succeed.

  • Fintechs in Brazil are likely to see substantial increases in market share, both by enfranchising financially-excluded customers and by taking market share from traditional providers and informal channels.

  • Key strategic priorities include technology investment, developing strategic partnerships and entering new customer segments.

  • Market dynamics, the long-term impact of Covid-19 and distribution capacity are the main growth constraints.

  • Incumbents are primarily responding to fintech competition by investing in technology, and through improved data analysis.

Brazil’s fintech landscape

Source: Tellimer Research, Crunchbase


We examine the fintech landscape in Brazil, including firms’ success factors, future strategies, innovations and growth constraints. We study financials, telecoms and technology sector incumbents to assess how they are responding to the fintech threat. We also survey Brazilian consumers to ascertain their current financial product preferences and future expectations to see what that means for Brazil's fintechs. Lastly, we highlight some interesting innovations from selected fintech firms.

The Brazilian fintech landscape is well-diversified with a strong focus on security and anti-fraud platforms. Fintechs are generally profitable, with better positioning and strategies compared to global EM peers. Access to funding appears favourable, with deals worth US$1.4bn closed in 2019, behind only India and China in our EM sample. The top values Brazilian fintechs offer to their customers are increased security and product quality. The most important factors driving these firms' success to date are competitive pricing, operational efficiency and targeting financially-excluded customers.

Looking ahead, Brazil fintechs are likely to increase their market share substantially, both by increasing the size of the pie (enfranchising financially-excluded customers) and by capturing clients from traditional providers and informal channels. To achieve this growth, fintechs are planning to invest in technology, develop strategic partnerships and enter new customer segments. Targeted innovations include introducing chatbots and virtual assistants, digital banking and cloud technology.

Market dynamics, Covid-19 long-term impacts and distribution capacity are major growth limiters, while capital requirements, deposit insurance and data protection are vital regulatory hurdles.

Incumbents plan to better compete with fintechs primarily via technology investment and improved data analysis.

The fintech landscape in Brazil

Among our seven sampled EM systems, Brazil is the third-largest fintech hub, after China and India. The Brazilian fintech ecosystem is well diversified; payments and lending are the largest sectors, as in many other markets, but the prevalence of anti-fraud platforms is much higher than elsewhere and is potentially a niche where Brazil can claim global leadership. For example, Konduto enables online retailers to reduce fraud by analysing consumer behaviour.

Brazil fintech product mix

The level of fintech sophistication is strong

To evaluate the level of Brazil’s fintech sophistication, we assessed the country relative to six other emerging markets (China, India, Indonesia, Kenya, Mexico, South Africa) across a range of metrics (fintech density; scale of fintechs; ecosystem diversity & profitability; funding access; positioning and strategy).

Brazilian fintechs scan well on our sophistication assessment, ranking second to China among the seven assessed countries. They score well in terms of ecosystem diversity and profitability; 63% of fintechs are outside of the lending and payment sectors (56% is the EM average), and 53% of surveyed fintechs claim to be profitable already. Fintech penetration is high, and fintechs appear to be better positioned and with more sensible growth strategies compared to global EM peers. The scale of fintechs and their funding access is in line with global peers.

Fintech sophistication scores

Funding analysis

Brazilian fintechs raised US$1.2bn funding in 2019 across 28 deals (Crunchbase data). Among surveyed emerging markets, Brazil ranked third in total funding received (behind China and India). It is the largest market in Latin America, receiving around half of total fintech funding to the region.

Latin America fintech funding flows

Most of the top funding deals were in the payments and lending segments. The biggest transactions (>US$200mn) include Nubank (US$400mn, a neobank with focus on payments), Banco Inter (US$330mn, a digital-only bank) and Creditas (US$231mn, a secured lending platform).

Top fintech funding deals in Brazil

The fintech customer value-proposition: Security and quality

According to Brazil’s fintechs, the top values they provide to their customers are high security and product quality. Relative to other emerging markets, we observe there is more emphasis on security and less on convenience.

Increased security: Cybersecurity is a key concern for the digital financial services industry and requires continuous investment to protect consumer data. Brazil stands out relative to other surveyed markets for its greater focus on this area; the country has a much greater proportion of anti-fraud-focused fintechs than elsewhere. For example, Idwall is a Brazilian start-up that provides customer onboarding solutions to other fintechs with facilities such as background checks, document OCR (optical character recognition) and face-match solutions.

Product quality is a catch-all term, in our view, which includes factors such as ease-of-use, product innovation, seamless execution and speed of service. This may explain why it is mentioned as the top value by both fintechs and consumers, not only in Brazil but in most of our markets. Some Brazilian fintechs mentioning this as their key value proposition include Pravaler (lending) and Superdigital (payments).

Key fintech values

Leading factors for fintech success: competitive pricing, operational efficiency and targeting unbanked

The top three success factors cited by Brazil fintechs are competitive pricing, operational efficiency and targeting financially-excluded customers. This is broadly in line with what other EM fintechs have indicated, but in Brazil there is less emphasis on first-mover advantage.

Competitive pricing. This reflects customers’ price-sensitive mindset; for 65% of our surveyed Brazilian consumers, pricing is a very important factor in their purchase decision. Fintechs can offer low prices given their greater automation and focus, use of outsourcing, and innovative distribution. Fintechs citing this success factor include Byebnk (blockchain) and Nubank (lending).

Operational efficiency. The business model of fintechs normally takes time to become profitable as marketing costs, agent commissions and other operating expenses weigh heavily when the top line is still not fully developed. Many Brazilian fintechs attribute their success to their operational efficiency, which tallies with 53% of surveyed fintechs in Brazil being profitable, compared to just 37% in other EMs. Fintechs mentioning operational efficiency as a success factor include BLU365 (lending) and Prime Fidelity (payments).

Targeting financially-excluded customers. A major growth opportunity for EM fintechs is addressing financially underserved populations that have been neglected by traditional financial services providers. Around a quarter of Brazil’s adult population is unbanked, but even people who can access traditional financial institutions may not be receiving a good service. Our survey indicates that Brazilian consumers prefer fintechs over formal financial institutions for a wide range of reasons, such as pricing, innovation and convenience. Fintechs that attribute their success to targeting underserved customers include Spin Pay (payments) and Terra Magna (risk management for agricultural businesses).

Key fintech success factors

Fintechs’ plans: technology investment, partnerships and new customer segments

Our survey showed that the top three strategies for Brazilian fintechs are technology investment, making strategic partnerships and entering new customer segments. Compared with those in other emerging markets, Brazil fintechs are less focused on introducing new products,

Technology investment. Technology such as machine learning (ML) and artificial intelligence (AI) can improve the speed, cost and quality with which services are delivered to consumers. Conductor (payments) and Pravaler (lending) are among the Brazil fintechs planning more technology investment.

Entering strategic partnerships. Partnerships are important for fintechs to expand their service offering and to improve their quality of service. Fintechs looking to establish partnerships include Geru (lending) and Axur (anti-fraud platform).

Entering new customer segments. Brazil is the sixth most populous country in the world with a diverse customer base, so fintechs have good opportunities to modify their existing offerings to appeal to new customer segments. Orama (investech) and Pier (insurtech) are among the fintechs planning to adopt this approach.

Fintechs’ future plans

Fintech innovations: Chatbots, digital banking and cloud technology

Considering their plans over the next three years, Brazil fintechs, like other EMs, are focused most on introducing chatbots and virtual assistants, digital banking and cloud technology.

Chatbots and virtual assistants help improve the customer experience by automating customer service/education and also allow fintechs to reduce their operating costs by limiting the staff required to handle customer queries. Fintech companies with plans in this area include Geru (lending) and PLIPAG (financial management).

Digital banking encompasses the full suite of products offered by traditional banks, but via digital channels. By adopting this approach, fintechs are simultaneously trying to capture a greater share of existing customers’ wallets and attract new customers to their franchise. Fintech companies with digital banking in their innovation plans include Weel (lending) and Stone (payments).

Cloud technology. Fintech companies use cloud technology to store and protect consumer data and to host services, which helps to reduce both operating costs and operating risk. Prime Fidelity (payments) and Orama (investech) are among fintechs planning to utilise more cloud technology in their businesses.

Targeted fintech innovations

Fintechs are likely to gain market share

We asked consumers which kinds of providers were meeting their current financial services needs for different products, and which ones they expected to use in three years. We used this data to estimate current and likely shifts in share of wallet for different types of firms. Currently, fintechs in Brazil have a 31% share in the overall financial services industry, which is above the 26% level for global EMs. Looking ahead, Brazil fintechs are likely to gain 11ppts of market share in the next three years, which is considerably higher than the 5ppts average gain expected in global EM. The shift is driven by all segments i.e offering services to non-users (5ppts), capturing market share from formal financial institutions (4ppts) and informal channels (2ppts); in other countries the shift is driven more by current non-users. Note that these responses are unweighted; we think formal financial institutions would have a much higher share if our survey were volume-weighted.

Financial services provider market shares

Key constraints to fintechs’ growth: Market dynamics, Covid-19 and distribution capacity

Market size and growth, Covid-19 long-term impacts and distribution capacity are the three biggest growth constraints cited by Brazil fintechs. Compared to other EMs, Covid-19 appears to be more challenging for Brazil fintechs, while concerns on regulations are lesser than elsewhere.

Size and growth of the market. It can be difficult for early movers to outgrow the overall market, particularly as the number of competing fintechs rises. We think market size is impacted by customer awareness; for example, insurance is a less-penetrated product in low-income countries, and blockchain is still an area where companies and individuals have minimal understanding. Stone (payments) and BLU365 (online negotiation of overdue debts) are among fintechs that cite market dynamics as a concern.

The long-term effect of Covid-19 can be detrimental to the overall growth of the economy and hence can negatively impact the fintech sector, though some sub-sectors such as payments are currently benefiting from Covid-19 lockdowns. Companies citing this factor as a growth constraint include Spin Pay (payments) and Weel (lending).

Distribution capacity. Smaller/ newer fintechs, like those in the insurtech sector, can struggle due to a lack of distribution capacity, particularly if they have been unable to develop partnerships with established companies or agent networks. For example, blockchain is still in its infancy, which is why many blockchain companies have failed to successfully partner with agent networks. Fintech companies citing this growth constraint include Orama (investech) and Bybnk (blockchain).

Key constraints to fintech growth

Fintech regulatory hurdles: Capital requirements, deposit insurance and data protection

Regulation is the most important risk faced by fintechs in Latin America, as per a recent Bank of International Settlements study.

Latin America fintech risk scores

Looking into more detail regarding this key regulatory threat, capital requirements, deposit insurance and data protection regulations are the key regulatory hurdles that Brazilian fintechs face, based on our survey. This is broadly in line with responses by fintechs in other emerging markets.

Capital requirements. Capital requirements tend to have a significant impact on barriers to entry for new players and are also a key consideration for incumbents while expanding the business. In general, fintechs tend to favour capital-lite business models. Fintechs citing this regulatory hurdle include Terra Magna (risk management for agriculture businesses), and Conductor (payments).

Deposit insurance. This challenge is cited more frequently by fintechs active in payments and lending. Since digital wallet accounts are one of the most frequently used financial products for low-income customers, they play a key financial inclusion role in emerging markets. This is drawing the attention of local regulators, who are understandably concerned about protecting customers’ balances. Affected fintechs include Prime Fidelity (payments), and Byebnk (blockchain).

Data protection regulations. One of the key competitive advantage fintechs can leverage is collecting and utilising huge amounts of data from their customers. Data protection regulations play a key role in determining the extent to which these companies can collect and use consumer data and the processes they must build to protect it, which could be an additional cost burden to fintechs. Fintechs citing data protection regulations as a hurdle to their growth include Superdigital (payments) and Pravaler (lending).

Key constraints to fintech growth

How incumbents are fighting the fintech threat: Investment in technology and data analysis

Technology investment is the main tool used by incumbents in Brazil to fight the fintech threat, followed by data analysis. These strategies are in line with incumbents in other emerging markets.

Investment in technology/automation. To boost process efficiency, financial institutions are adopting SaaS applications in areas such as accounting, human resources and KYC verification. They are also using cloud technology for data storage and security. Telefonica Brasil and Positivo Tecnologia are among the companies in Brazil that are increasing investment in technology.

Better analysis of existing datasets. In theory, incumbents have a big advantage over new entrants as they have large customer bases with long and relevant transaction histories. But often the data is not accessible in one place, and/or is difficult to work with. With the help of AI and ML, incumbent firms are now working more closely with this in-house data to offer more personalised and targeted services to their customers, and to make better-informed strategic decisions. Companies following this strategy include Pagseguro and Banco Inter.

Incumbents’ steps to counter the fintech threat

Innovative fintech practices

In the table below we highlight some innovative practices by Brazil fintechs based on our desk research:

Brazil fintech innovative practices

Other reports in our series

The ultimate guide to India fintech

The ultimate guide to China fintech

The ultimate guide to Africa fintech