After months of security and interoperability tests, B3, Brazil‘s stock exchange and one of the largest financial infrastructure companies in the world, effectively started operating its card receivables registrar business in March. It is the fourth registrar to enter the Brazilian receivables “party,” a market that reached BRL 2.6 trillion in transactions last year, according to data from Abecs, an association representing the country’s electronic payments industry. Still, it is a highly concentrated market — CERC, the first card receivables registrar authorized by the Bank Central in 2018; concentrates practically 80% of operations. The other two players in the market are Câmara Interbancária de Pagamentos (CIP), founded in 2001 and controlled by large banks, which also means that it concentrates the overwhelming majority of receivables from the biggest acquirers such as SafraPay, Cielo, Rede, GetNet, and TAG, created by Stone.
The good side of being the last one to arrive at the party is that B3 has no ties to banks and acquirers nor a technological legacy that hampers the company’s possibilities for action. This is also why B3 has been looking at fintechs and has announced Marvin as its first client — meaning that B3’s first clients are also Marvin’s clients.
Marvin, which created an arrangement to transform receivables into a payment method, was the first to connect to the production environment of B3. Still, it is also connected to the other three registrars, and this should continue for a long time. “Although the new regulation provides for interoperability, we knew from the beginning that this would be problematic. So we decided to ‘run’ in all registers, to operate only at ‘the edge.’ That is, I only trade [receivables] from Stone at TAG, or I only operate Rede’s receivables at CIP because that’s where Rede is, and so on; all this to mitigate the challenge of interoperability, which is not the only one but is one of the main challenges of the ecosystem. But doing this at medium and long term, it doesn’t make any sense”, explained the co-founder of Marvin, Bernardo Vale, to LABS.
“We are interdependent; if one registrar is not operating well, the others will not be either. This is one of the main lessons learned. The market almost stopped in that first week [post-regulation]. But I still see the different systemic architectures as a challenge. Even our entry into production was quite challenging and took a little longer than we imagined because to be able to connect to each of the other houses required a dedicated effort for each of them. The fact that we were working with one did not guarantee that we would ‘talk’ to the other two. This in itself creates additional management complexity. At the same time, not having a legacy of customers who depend on us allows us to learn while in motion,” stressed Fernando Bianchini, superintendent of receivables products at B3.
Having worked for the other “two sides” of the counter – seven years at Rede and several more at Grupo Santander before that – Bianchini understands well what customers – both acquirers and financial institutions – need.
B3 received authorization from the Central Bank to create its card receivables registrar in August last year, two months after the new sector regulation came into force. The new rules established that every card invoice had to be registered, by the acquirers and free of charge, within registrars. These registrars, in turn, would have to make their technological structures “talk” to each other.
With all invoices registered, merchants could begin sharing this information with more than one financial or fintech institution interested in providing them with credit or other services based on future payments. In practice, all these changes unlocked a new source of working capital. Before that, shopkeepers could only ask for anticipation of receivables from the banks with whom they worked or with the acquirers of their POS terminals, which to a large extent are also controlled by the same banks.
This whole picture changed when shopkeepers were able to share their receivables “agenda” with more than one financier at the same time, negotiating better conditions. This is possible because lenders can only retain as collateral the volume of receivables equivalent to the amount borrowed or traded instead of retaining the entire flow of receivables from the merchant, even if the amount borrowed was lower, as was the case before regulation.
The final goal of the Central Bank with the new regulation was to increase competition and reduce interest rates and spreads, especially for micro and small companies. This, effectively, has not yet happened precisely because of the concentration of agents in this market and macro issues, such as high inflation and benchmark interest rates. Even so, the financial breath that the receivables market brings to companies is already noticeable.
Marvin was launched in May last year with an eye on a specific part of the new regulation, which “liberated” the balance of the POS terminals so that retailers could use the receivables to pay their suppliers directly without the need to anticipate receivables in the form of credit. It raised its second funding round in August.
“If you ask any industry if it would give the franchisees or shopkeepers more time than 15 days so that they pay for products if this did not mean credit risk, the answer would be yes. Industries want to sell more but do not want to take credit risk. Merchants and shopkeepers need to buy more to sell more, but [the lack of] cash flow is what kills more than 50% of companies in Brazil. This chicken-egg discussion had no solution. That’s why we created a payment method through which we take the balance from the shopkeepers’ POS machines and give it to the industry. The industry drops the ‘accounts receivable’ it has with these merchants and opens another one with Cielo, Rede, etc. We unlocked the industry-retail relations,” explained Vale. “B3 currently has more than 400 companies listed, and many of them have no idea how they can benefit from this new market. We are keeping an eye on it.”
Currently, Marvin has 26 large industrial customers linked to more than 400,000 points of sale. One of these clients is Grupo Boticário, one of the largest beauty companies in Latin America. Marvin will, in fact, participate in the 2nd edition of GB Ventures, the company’s startup acceleration program. Among the fintech customers, there are also large fuel, food, and even footwear industries. Marvin’s goal, according to Vale, is to reach at least 25,000 points of sale paying the fintech‘s industrial customers with card receivables by the end of 2022.
For 2022, Abecs estimates that the card market will grow 21%, to R$3.2 trillion. Not only that: this industry is expected to grow in double digits by 2025. So even a tiny piece of this market is a lot.