Brazil fintech

Covid-19 has dampened investment into Latin America’s largest country, but the fintech space has remained buoyant.

Financial services and fintech foreign direct investment (FDI) into Brazil slumped last year as the Covid-19 pandemic ravaged the global economy, and spending continues to remain subdued as the Brazil government struggles to get on top of the crisis.

Brazil has the world’s second-highest Covid-19 death toll after the US, with more than 563,000 fatalities. The country is now battling a new wave of infections, which has overwhelmed hospitals.

Capital expenditure fell 24% year-on-year to $1.25bn in 2020 and currently stands at $775.7m this year to the end of June, according to FT-owned greenfield data monitor fDi Markets. The number of projects in 2020 fell from 16 to 11 in 2019, and just six projects have been announced so far this year.

“Covid-19 has encouraged some global banks to reduce their footprint in Brazil by cutting the size of teams and closing branches, so they can focus on their own market,” says Bruno Soares, a São Paulo-based partner at law firm Allen & Overy. “At the same time, it has also encouraged the boom in the fintech space.”

Of the 1716 jobs created in the sector last year, 1590 were in fintech, compared to 126 jobs in traditional financial services.

Fintech attraction

In June this year, Spain’s Belvo, an open-banking platform that enables data connections between banks and other companies, announced plans to expand its São Paulo office. The company plans to hire 50 engineers across Brazil and Mexican by the end of 2021, after raising $43m in series A funding. The fintech is focused on the Latin American market.

In May this year, Argentina’s Pomelo, a start-up building a fintech-as-a-service platform for Latin America, opened an office in São Paulo after raising $9m in seed funding. And in June 2020, Argentina’s VeriTran, a software solution provider for secure digital banking and mobile payments solutions, also opened an office in São Paulo to focus on the Brazilian market.

A large part of the Brazilian population has not been captured by the traditional banks and fintechs are stepping in

Bruno Soares, Allen & Overy

“A number of foreign companies are looking to tap into the growth in mobile banking in Brazil,” Mr Soares adds. “There is a large part of the Brazilian population that has not been captured by the traditional banks and fintechs are stepping in.”

The unbanked population of Brazil decreased by 73% during 2020, according to research by Mastercard, as rural communities signed up to online banking services to receive Covid-19-relief funding.

Spain leads in investment

Spain was the top source country for financial services and fintech FDI projects, as well as capital investment into Brazil in 2020, investing $465m.

Spanish banking giant Santander has made Latin America central to its long-term strategy, with the region making up an increasing amount of its revenues. In February this year, Santander Brasil announced plans to open 10–15 new offices in the north of the country, as well as Mato Grosso state in the west-central part. In June last year, Santander Brasil announced the creation of 1500 new jobs in technology and data, as well as risk and legal.

As Brazil’s dominant financial centre, a lot of FDI has focused on São Paulo, with eight projects last year accounting for capital investment of $790.3m. Of the six projects announced so far this year, five are in São Paulo.

In March this year, Swiss private bank Lombard Odier Darier Hentsch opened a new office in São Paulo to serve Brazilian clients, while in January, Lexington Partners, a New York-based manager of secondary private equity funds, opened a new office in São Paulo to focus on the regional opportunities.


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