The regulatory easing adopted by the Central Bank in recent years has allowed the emergence of digital banks, fintechs and other types of financial institutions willing to confront the hegemony of traditional banks in Brazil. Among them are small banks that are more concerned with social issues than with profits – or so their executives claim. These institutions have digital accounts, cards, and other services expected from any modern bank, but they aim to be different in the personalized offers to specific publics, raising their flags, as is the case of black, marginalized, and LGBT+ communities.
“The banking core is tooling,” says Fernando Zago Lóes Moreira, co-founder of Banco Afro, the first social bank in Brazil, according to him. Targeting classes C, D and E, Banco Afro emerged from the concerns of Diego Reis, from the AfroEmpreendedor collective and co-founder and CEO of Banco Afro.
He [Diego] was telling me, ‘The problem of the community is financial. The guys don’t go through the bank’s door.’ He said, ‘Man, I’m going to open a bank to help these people,’ and I said, ‘Nice, how do you start a bank?’.
Fernando Zago Lóes Moreira, co-founder at Banco Afro
Apparently, together they managed to crack this secret. Banco Afro focuses on productive chains, working with programs that follow the low-income, unbanked client more closely, beyond simply providing services and benefits.
Founded shortly before the pandemic, Banco Afro already has at least one successful “case” to validate its thesis. It is Pintar o Bem program, in partnership with Suvinil, from the German company Basf. Suvinil wanted to distribute food vouchers to help painters in the first wave of the pandemic. Through the Integrated Center for Studies and Sustainable Development Programs (CIEDS in Portuguese), it reached out to Banco Afro. “We could, within the community, develop the painter. Not only to take him out of the situation of vulnerability, of hunger but to help him get back to the market with a more complex social product,” explains the executive.
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With the support of Suvinil and 110 other donors, Banco Afro has raised almost BRL 2 million for Pintar o Bem program, which attracted almost 2,000 painters, and began to distribute a benefit, of BRL 600 split into three BRL 200 installments, with a specific destination, while developing the productive chain: the beneficiary gets a digital account in Banco Afro with all the facilities for commerce (PIX, the Brazilian instant payment system, for example) and small e-commerce, a website with his professional data, which is now included in professional databases, generating job opportunities.
It is this close monitoring that makes Banco Afro stand out and, in Fernando’s words, makes it the first truly social bank in Brazil. “If you take what Caixa does, it is not social, it never was. If you take the Minha Casa Minha Vida program, the guy must have a formal job and make a down payment of 10% of the value. It is a requirement that contemplates the middle class upwards, but is very far from the lower social classes.”
Another problem of the traditional banks’ model would be the lack of follow-up. The executive is critical of the emergency aid distribution model: “I take the money, put it on the card, and that’s it. You ask if the card was used. But does the guy know how to use it? The bank doesn’t care. Will he use it for the right and proper purpose? They don’t care either.”
At Banco Afro, the benefits are tied to a contract. “If the contract says that you can only use it for food and pharmacy and the beneficiary uses it differently, he is notified. And if he uses it wrong again, his benefit is canceled and the system pays the next one in the social ‘score’,” he explains.
At Banco Afro, bank fees count but are not the main source of income. Instead, revenue comes from social products and technologies. “As the banking product is a commodity and we use it as a tool, our logic is also not to have it as the main source of revenue,” says Fernando. The main objective of Banco Afro is to offer real estate credit: “Our dream is to be able to finance the ownership of homes in this productive chain, for those who are at the bottom of the chain.”
The executive does not disclose numbers, but says that Banco Afro, founded with the partners’ own capital, has been operating profitably since the second month and is already attracting the interest of investors – the company has accepted an investment “without equity” and is considering more conventional funding round at the end of the year.
LGBT+ Pride and nano and micro-entrepreneurs from the slums
The idea of promoting social missions based on banking technology, something that already happens in other markets, such as the US, is spreading in Brazil. In addition to Banco Afro, other initiatives follow the same path, such as Pride Bank, which focused on the LGBT+ public, and Banco Maré, which serves nano and micro-entrepreneurs in the slums of large cities.
Created in 2017 by Alexandre Albuquerque, Banco Maré was born to tackle a major problem in underserved communities: the lack of access to basic financial services.
People had a huge difficulty to pay bank slips. The Complexo da Maré has 19 communities, but there is no bank branch here, there are few lottery stores, and the lines would get very long. It was quite a struggle.
Amanda Magalhães, CEO of Banco Maré
The first product of Banco Maré was composed of a “super simple” digital wallet, in the words of the executive, with options for paying bills, recharging cell phones, and making transfers, and a network of “kiosks”, sort of physical bank branches spread throughout the communities, where users could withdraw cash, make deposits.
Then the pandemic came, and Banco Maré went through a major turnaround, and the idea of what Banco Maré could be from then on began to form. “A big key point was realizing that Mare is actually much more than a digital bank. Our big purpose is to be an agent of transformation and inclusion, not only financially, but also productively,” says Amanda.
Banco Maré started to look for new services and opportunities, besides financial ones, that it could offer via partnerships. “Whether it’s education, or training or a link to other types of access that Banco Maré doesn’t offer today – for example, microcredit, investment… this kind of thing,” explains the CEO.
Thus, the Banco Maré app was relaunched, now with the intention of becoming a super app for the communities it serves. “We’re partnering with other microcredit companies, investment companies, because our trend is to focus on relationships, on convictions, on data intelligence – good or bad, there’s also a lack of much intelligence about the needs of this stratum [of the population].”
Conceived by Maria Fuentes and launched in November 2019, Pride Bank emerged from the question: “Why not a credit card that is for the LGBT+ community, but that reverts its profits to the community, that helps the community?” Marcio Orlandi, an outspoken gay man and activist, joined the project and took over as CEO of Pride Bank. Marcio quotes data from IBGE, which estimates Brazil‘s LGBT+ population at 20 million people, as proof that the idea has room to develop in the country:
A big part of it is people who are young, who were kicked out of their homes; trans people who can’t get jobs, who need help. So it has a very strong social side. To me, that’s the most important side of Pride Bank: it comes to transform.
Marcio Orlandi, CEO of Pride Bank
Pride Bank offers some practical differentials. The name on the credit card, for example, does not have to be the same as the name on the civil register. “Many people have not yet gone through this process [of name rectification], but already want to be called by the social name they have chosen. We accept the social name immediately,” he explains.
The basis of Pride Bank’s operation is to take off-the-shelf products, which every bank and fintech offers, and modify them in order to meet its target audience. “How do I make [the product] a little different to serve it better?” asks Marcio. At the moment, he and his team are focused on creating a health plan “with doctors prepared to serve [the LGBT+ population],” that is, who won’t be scared or rude to a man who has changed sex and needs to see a gynecologist, for example. Marcio believes that there are opportunities in several sectors, such as insurance, tourism, foreign exchange, and investments.
Besides these tailor-made products and services, Pride Bank aims to become a reference in promoting the cause. “Our goal is to be the largest sponsor of culture, entertainment and sports for LGBT people,” he says.
Marcio won’t open Pride Bank’s revenues, but says it is “a startup that is already working and thinks it can now discuss investments.” The first conversations for fundraising are already happening.
A diverse world
Traditional banks and generalist fintechs have been moving to pay attention to minority audiences and those historically neglected by the banking industry.
Sometimes, the commitment comes on the heels of a slippage. In October 2020, Cristina Junqueira, cofounder of Nubank, made a racist statement on the Roda Viva program. The strong reaction of public opinion led the fintech, one of the largest in the world, to launch a major onslaught to include black people in its staff.
At that time, Banco Afro received “many clients coming from Nubank,” Fernando recalls. All were well received, but they didn’t change the institution’s mission. “That’s not our business, it’s not to compete with Nubank. We have a very specific mission, which is to raise the flag for the black cause, for black money, to raise the flag for classes C, D and E, where the great majority is made up of minorities”.
This seems to be the keynote of digital banks with the social appeal. They are, to use an advertising cliché that does not sound empty here, more than banks. This aspect is so strong that it doesn’t take long for the “core” banking, the commoditized tooling mentioned by Fernando, to take a back seat.
“Despite being born as a fintech focused on financial services, we are positioning ourselves as a major ‘hub’ for productive and social inclusion,” explains Amanda, of Banco Maré. She admits that if the venture remained focused on standing up to generalist bankers and fintechs, Banco Maré wouldn’t stand much of a chance. “We have seen, from 2017 to now, that the number of digital banks has increased a lot, but the great differential of Maré is being inside the community and understanding the needs of a marginalized public like no other institution can.”
For Marcio, the agenda of diversity is imperative in all businesses, but the more traditional ones still have a big challenge: “One thing is to start being diverse internally so that it can have all the diversity in its staff because with this it can create good products. It is another thing for it to be prepared to serve outside,” he argues.
Before the launch of Pride Bank, a survey was done with the LGBT+ community to identify the level of satisfaction with banks. Things like fear of being rejected at the entrance of the bank or having services denied just because of their status were expressed by the respondents. “We saw that there is a very big rejection.
The three companies emphasize that their services are open to all publics, not only to LGBT+, peripheral and black people. “The social and productive inclusion actions are aimed at nano and micro-entrepreneurs from the periphery,” explains Amanda, from Banco Maré, “but anyone who wants to be part of this movement and somehow be within this cycle, which is really cool, of social impact, is more than welcome. For Marcio, the only people who are not welcome are prejudiced: “Obviously, we know that homophobic people will not want to be part of this movement, and I really don’t care. But, allies, we do want it.”
(Translated by Carolina Pompeo)
