The growth of fintechs in Brazil has been closely monitored by market participants for years. The narrative is well established: the high adoption of digital technologies (71% of the population has a smart phone) in the huge, entrepreneurial economy has led to a wave of fintech innovation. According to a recent report by McKinsey & Company, there are now around 400 fintechs operating in Brazil which are growing at a compound annual growth rate of 96%.
However, to date the growth has been largely alongside that of the banks. These incumbents have responded to the appearance of the fintechs by adopting a mixture of digital innovation of their own, buying or working closely with fintechs to lessen competitive dynamics, and at times simply ignoring those niches where the nibbling away of profit margins barely registered on the broader profitability of the bank’s operations as a whole.
That uneasy truce is over.
In April the first real shots in the war were fired by the banks. And it is no surprise who the first target is: the payment fintechs, which represent 20% of the total.
