Blog

Startups and VCs see opportunities in open banking, finance and insurance

Brazilian instant payment system Pix ended 2021 having powered more than 8 billion transactions, according to statistics from the country’s Central Bank. This is quite an impressive figure for an offering only launched in November 2020 and goes to show how ubiquitous Pix has become in the country.

You could describe Pix as “a government-built version of Venmo,” as João Pedro Thompson, founder of fintech Z1, told TC. However, the analogy doesn’t fully capture the fact that Pix appeals to many more than just digitally savvy teenagers repaying friends for coffee. Otherwise, it wouldn’t be used by six of 10 Brazilians.

In a country where many people are still unbanked and queuing to pay bills is part of daily life, the impact of being able to pay anyone instantly can’t be understated. In addition, Pix now supports more services, such as letting you withdraw cash from businesses.

It’s interesting that Pix is an institutional initiative, part of a wider range of public efforts to transform Brazil’s financial landscape. “The Central Bank has been doing a tremendous job and Pix is one of the most relevant structural changes,” Brazilian VC Bruno Yoshimura told TC when we wrote about Latin America’s fintech boom.

I’ve lived in Brazil, so this naturally piqued my interest. At the time, entrepreneurs were constantly complaining about bureaucracy, and their highest hope was that institutions would just stay out of the way. But now, VCs and founders are actually praising the Central Bank for its initiatives and the opportunities it has created.

“Both Open Banking and Pix will level the playfield for new challenges, and we expect to see a lot of innovation around them,” Yoshimura said, referring to another of the Central Bank’s projects.

It’s not just Pix, and it’s not only the Central Bank’s BC# agenda either. Brazil’s Superintendence of Private Insurance (Susep) is working on open insurance plans, which means that insurtech could be the next sector to benefit from regulatory tailwinds.

To understand what’s going on with regulations in Brazil, and how this is affecting startups, I reached out to experts with firsthand knowledge of Latin America’s fintech ecosystem.

On the VC side, I got in touch with Amy Cheetham, a partner at Costanoa Ventures, whose recent investments include Rio de Janeiro-based Plug; and Alma Mundi Ventures‘ Javier Santiso for additional thoughts on insurtech. On the startup side, I spoke with CEOs Rodrigo Teijeiro from RecargaPay and Pedro Sônego de Oliveira from TruePay.

Opportunities abound

“The open banking initiatives adopted by Brazil’s Central Bank are absolutely tailwinds for fintech innovation,” Costanoa’s Amy Cheetham said. “As consumers regain control of their data, it creates space for new entrants to the banking ecosystem and creates more competition, giving consumers access to better, cheaper, fairer, and more secure financial products and services. This includes giving fintechs the power to build for previously [underserved] or unserved segments of the population,” she explained.

RecargaPay is one of the startups leveraging the new regulations to expand their B2C services. “Our mission at RecargaPay,” founder Teijeiro said, “is to democratize mobile payments and financial services in Brazil, so open banking and Pix are the perfect recipe to accelerate our mission.”

Teijeiro is particularly appreciative of Pix and its “incredible” trajectory. “What was accomplished in just one year was a tremendous disruption benefiting millions of Brazilians by making their payments easier, faster and cheaper. For this, the Brazilian Central Bank deserves to be recognized as the ‘fintech startup of the year,’” he said, describing Pix’s impact on cash going mobile as “a huge blessing for RecargaPay.”