A few days ago, the apparent truce that reigned between traditional banks and fintechs in Brazil was paused, and the quarrel has continued ever since. It all started with a marketing campaign by Mercado Pago, the financial arm of Mercado Livre, which placed a person dressed as a dinosaur in front of some bank branches last week. Febraban, the federation that represents the country’s largest banks, did not find it funny.
In a post on LinkedIn last Sunday (19), Febraban lashed out at Zetta, the association that represents fintechs, claiming that large fintechs benefit from tax, regulatory and labor advantages, while “banks generate more than half a million jobs nationwide and have more requirements, unlike fintechs that do not have to follow the rules for hiring bank workers.”
“Fintechs pay far less tax than banks, which pay 45% on profits, 25% income tax and 20% Social Contribution on Net Profit (CSLL in Portuguese), while fintechs pay only 9% or, at most, 15% CSLL,” says the text.
It even hit Nubank, which according to Febraban, “has look, size, products and even the name of a bank, but prefers not to call itself a bank, and yet charges higher interest rates to its customers than the average of the five or 10 major Brazilian banks”.
Last Tuesday (21), Zetta replied, also through a note posted on LinkedIn. According to the entity, the regulatory asymmetry favors traditional banks with competitive and economic advantages, and not fintechs, which have higher financial requirements and more legal requirements.
Zetta said that fintechs pay more taxes than traditional banks and are subject to a number of rules that do not apply to banks, such as the fact that they cannot use the amounts deposited in their accounts to generate loans, something that banks can do.
Finally, the entity said that the interest rates of its three largest affiliates are lower than those of the five largest traditional banks and that traditional banks still concentrate 68.5% of the entire credit market in Brazil, which harms competition and fintechs.
This public spat between Febraban and Zetta comes on the heels of a series of intense changes in Brazil‘s banking system, led by the Central Bank, with the beginning of the open banking earlier this year and the launch of PIX (the Brazilian instant payment system) last November.
The two innovative agendas increase competition and stimulate the emergence of new products and services, which is not exactly good for the big banks, used to a hyper-concentrated market.
On the other hand, a series of problems in the open banking implementation schedule – the second and third phases had to be postponed due to problems in the integration process and technical adaptation of the participating institutions – and a recent wave of scams and frauds involving the PIX have weakened the innovation agenda and increased tensions among the system’s participants.