14. Fintech Companies in Brazil: Assessing Their Effects on Competition in the Brazilian Financial System from 2018 to 2020

This chapter analyzes the competitive impacts of fintechs in the Brazilian financial industry. It focuses on payment institutions, as regulated by the Central Bank of Brazil (BCB), and evaluates how, and through which channels these firms are affecting the profit rate of incumbent banks. We use data from the balance sheets of Brazil’s main universal banks and larger payment fintechs to build indicators to assess which traditional banking revenues would potentially be under threat from such fintechs. We conclude that empirical evidence shows that payment institutions are putting pressure on the service revenues of the main private banks—especially in the credit card segment—but those effects are not yet significant enough to influence revenues and profitability of large banks in the period 2018–2020. Drawing on our case study, we suggest that material changes in the financial systems’ competitive landscape induced by fintech startups can be limited and highlight the importance of defining relevant markets when analyzing the competitive impacts of fintechs.