Tech Roundup: The next frontier for Brazilian fintechs

by | Feb 10, 2021 | Articles, Digital

With the average Brazilian becoming more financially sophisticated in recent years, the once-unattainable dream of investing abroad is now edging closer to reality. However, the wish for Brazilians to diversify their portfolio has come up against the country’s cumbersome process for international transfers — which is where homegrown fintechs have stepped in.

• New data from the Central Bank shed light on the potential of Brazil’s international transactions market. In 2020, Brazilians received USD 3.3 billion from foreign accounts, the largest total since the monetary authority began measuring in 1995. The Central Bank says that these transfers are largely carried out by Brazilian expats sending money home, and the total has increased due to the devaluation of the Brazilian Real.

Fintechs to the rescue. Over the past year, fintechs such as Nomad and C6 Bank are offering their customers the possibility of opening accounts abroad and obtaining local debit cards. This not only allows clients to stockpile USD for a potential future holiday but also use dollar reserves as a way to save money.

• Being fully digital, these companies have fewer expenses and offer cheaper costs than regular bank transfers. Nomad, for instance, claims its account offers savings of up to 10 percent, while C6 Bank estimates their customers face costs at least 7 percent smaller than using traditional banks.

Fintechs: changing plans. When C6 Bank launched their dollar-based account before the Covid-19 pandemic, tourists were the target audience. However, once social restrictions were in place, the bank saw two changes in customer behavior: clients were using their accounts and debit cards for e-commerce purchases and as an investment option.

• “As people couldn’t travel, we’ve seen people opening the accounts, but not using them as we expected. Right now, they keep it to save in dollars and for shopping on e-commerce sites. But, when social restrictions are lifted, we expect users to skyrocket,” said Maxnaun Gutierrez, head of products at C6 Bank, in an interview with The Brazilian Report.

Next steps for fintechs. Building on its first initiative, C6 Bank launched a global account in Euros in December of last year. Now, it plans to allow customers to invest with the money they have saved. “We’ve already opened a brokerage in New York that currently works for our institutional customers, so the next step is to offer investment options, like bonds and stocks in this global account in the next few months,” he said.

Fintechs target overlooked audiences. As we previously reported, the small business segment is one that fintechs are eagerly targeting thanks to the rise of entrepreneurship in Brazil – and it would be no different with global accounts.

• In January, BS2 bank launched a fully international corporate account, allowing business owners to receive payments from abroad in an easier, tax-free way. Mr. Gutierrrez reckons there is a large audience there — including social media influencers that receive payments from YouTube and digital marketing professionals — and believes it is a niche C6 could also explore if there is enough demand.

5G in Brazil: the plot thickens
Brazil’s telecommunications regulator Anatel surprised markets by calling an emergency meeting on February 1 to discuss the country’s upcoming 5G spectrum auction. But a discussion that was supposed to bring clarity ended up leaving the waters even murkier. The main sticking points around the adoption of 5G in Brazil — the demand for a separate network for government systems and a potential ban on Chinese firm Huawei — remain open-ended until at least February 24, when the Anatel board meets once more.

New demands. Winning 5G bidders will be required to set up (and pay for) a separate network for the federal government. They would also have to increase fiber-optic coverage in the Amazon region, making connections (4G or faster) available in remote areas and on major roadways.

• After backlash from the government’s economic team, Communications Minister Fábio Faria admitted the administration’s demands for a separate network may be altered.

Huawei or not Huawei. Members of the lower house’s 5G Committee see the government’s demand for a private network as a veiled attempt to keep Huawei out of the bidding process. Anatel board member Carlos Baigorri, who will oversee the auction, said the company does not meet the minimum criteria to ensure network security, including transparency and governance rules. Lawmakers reportedly plan to summon representatives of Anatel and the Communications Ministry to a hearing in the 5G Committee.

Globetrotter. Mr. Faria is currently leading a ten-person mission to Sweden, Finland, South Korea, Japan, and China — to meet with leading 5G suppliers.

• After their first stop in Sweden, it soon became clear that 5G was not the only topic on the agenda. Mr. Faria used the occasion to discuss the shipment of more Covid-19 vaccines to Brazil with Marcus Wallenberg, chief executive officer at Investor AB, which owns a stake in both British-Swedish lab AstraZeneca and telecom equipment maker Ericsson.

5G for vaccines. The episode once again shows how the Brazilian government is using the upcoming 5G auction as a bargaining chip with countries that produce coronavirus vaccines. Midway through January, the Communications Minister attended a meeting with the Chinese Embassy which was officially to discuss vaccine inputs.

True crime show ignites debate on right to be forgotten
This week, the Brazilian Supreme Court kicked off a trial over whether or not the so-called “right to be forgotten” should be introduced into Brazilian law. The decision will lay the ground for future data protection cases in the wake of the new General Data Protection Law (LGPD). So far, freedom of expression has been one of the justices’ main concerns.

What is going on. Curiously, the trial in question has no connection to the internet, instead concerning the now-defunct true crime show Linha Direta. In 2004, the Globo TV show broadcast an episode telling the story of a rape and murder case dating back to the 1950s. The victim’s family sued Globo, saying that reviving the case was too painful for them — igniting a discussion around the right to be forgotten that later made it to the Supreme Court.

State of the trial. So far, the case’s rapporteur, Justice Dias Toffoli, is the only member of the court to have issued his opinion on the matter, ruling against the plaintiffs.

• In his view, “forgetting true information, obtained in a legitimate way by the media, is incompatible with the Constitution.” Therefore, allowing the right to be forgotten would put individual rights above freedom of expression. He added that the Constitution already protects people from libel.

Context. Experts heard in the trial helped to shed light over the political implications that the right to be forgotten would have in Brazil. Representing the Brazilian Association of Investigative Journalism (Abraji), lawyer Taís Gasparian highlighted that the politicians are the people who most often request the removal of online content in Brazil.

• Granting them the right to be forgotten “would benefit people that try to hide information from the public.”

Protecting democracy. Law professor Luan Pedro Conceição believes that, if a majority of justices follow the rapporteur’s vote, the Supreme Court would be building upon its long-standing tradition of protecting democratic freedoms.

• “The fear of censorship and control of the media is a very strong element in this trial, the democractic dimension of the freedom of speech is central here. So far, the court is leaning toward defending freedom of speech rather than the right to be forgotten,” he told The Brazilian Report.

Legal debates. During the trial, the Brazilian legal community debated on whether data protection regulations could serve as grounds to enforce the right to be forgotten, as the legislation does not mention this specific term. Lawyer Nuria López believes that the law does in fact grant rights which are the foundation of the right to be forgotten.

• The problem, she says, “is about how you make it possible on the web, with tools such as VPNs that allow you to access the internet as if you were in another country, or the mere fact that the justice system can only act within the country.”

Take Note

Space. February 28 will mark the launch of the first 100-percent Brazilian observation satellite into the Earth’s atmosphere. The Amazônia-1 satellite will go into orbit as part of a mission sponsored by the Indian Space Research Organisation (ISRO) and will be tasked with providing data on Amazon deforestation. The satellite will also monitor agricultural land in the country. Amazônia-1 is the first of three satellites that the Brazilian Institute of Space Research (Inpe) aims to launch as part of a mission to monitor the Amazon rainforest.

Scholarship. Banco Inter launched a new program to grant 30,000 scholarships to software developers in Brazil. The program will initially focus on students studying Java but will eventually extend to other areas of software development. Students may file applications for the first 10,000 scholarships until February 27, by way of the program’s website.

Cloud computing. The federal government has reopened a public bidding process to hire a new multi-cloud broker to manage at least two clouds to store data from 52 government institutions. Under request from companies, the winning bidder will be able to outsource services in the contract, valued at BRL 370 million.

Data privacy. The National Data Protection Agency opened a public hearing to gather nominations for the National Data Protection Council. As established by the General Data Protection Law, the Council will comprise representatives of civil society and will assist data regulators on its decisions regarding data privacy in Brazil.

Stocks. Mosaico — the holding firm of price comparison websites Zoom, Buscapé, and Bondfaro — saw its shares skyrocket by 70 percent on its first day of trading at B3. The company raised BRL 1.2 billion through its initial public offering this week. Another debutant on the stock market, decor e-commerce Mobly, raised BRL 812 million and saw shares rise 21 percent in its first trading session.

Article published on The Brazilian Report. Read it here.

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