In this process, many companies from different segments realized that their businesses already had or needed financial operations, whether to improve their transactions, processing and processes, optimize financial results or even take advantage of opportunities in their value chains. The pandemic boosted this growth.
According to a survey by the American internet analysis company ComScore, Brazil registered an increase of almost 200% in access to digital banks in April 2020. Among the 20 most accessed online financial services in March this year, more than 50% were fintechs or digital banks. The report 'State of digital banking in Latin America' points out that the reach of banking websites in Brazil reaches 73%; in Chile the rate is 66% and 61% in Argentina. Websites that allow virtual payments also had an increase in audience from January 2020 to January 2021: Pagseguro grew 216% and PicPay 80%.
High standard of financial industry requirements
The traditional banking industry is already adequate to the high standard of requirements and levels of regulation, as highlighted by Thiago Brehmer, lead partner of Financial Services at Grant Thornton Brazil. “In terms of regulation, the Brazilian Central Bank (Bacen) has always been far ahead with what we call prudential regulation, which began in Brazil in the 2000s, with the creation of risk management rules and adherence to international management practices capital, through the 'Basel Agreement,' causing the institutions authorized to operate by Bacen to adapt to certain standards, and which culminates in the adoption of Resolution 4,557 (GIR - issued in 2017), which determines a look at risk in an integrated way, already considering the multiplication of the market.”
“After a significant evolution in the prudential issue, we started to look at the innovation of the financial system. Based on this perspective, the #BC agenda emerges (launched by the Brazilian Central Bank in 2018), which encourages more digitized, automated processes, products with the purpose of expanding banking services and the range of companies operating in the financial market. We realized the robustness of the system when the regulator itself began to bring up innovation issues and a more technological agenda, such as PIX and Open Banking.”
Open Banking complements a demand that emerged as the market progressed, enabling standardized information sharing, with customer authorization. In Brehmer's view, it is part of the proposal to democratize access to the financial system. This enables the customer, based on their own data, to obtain benefits in different institutions, such as products and services more in line with their needs, reinforcing the concept of bringing that customers the financial system and empower them.
In the case of PIX (Brazilian instant payment), in addition to the speed in carrying out transactions, the possibility opened up for other institutions, in addition to those that already operated in traditional payment arrangements, to become payment initiators and intermediaries (indirect participants). This causes more customers to be able to have access to the electronic payments system, which until then was restricted only to those who had checking accounts.
Larger Market, Growing Need for Risk Management
Given this constantly evolving environment, Brehmer explains that it is essential to ensure that institutions maintain good levels of risk management and compliance. “There are several requirements that need to be observed and fulfilled by financial institutions for all this evolution to continue happening, even today, when we talk about LGPD (General Data Protection Act in Brazil), in relation to the way in which data storage will occur, there are controls that need to be implemented with customer data, when acting on demand for information, among other aspects,” he warns. “We act mainly by ensuring that institutions meet what is required by the regulator and with good market practices, thus ensuring that our customers can continue to innovate and focus on growing their business.”
For the specialist, there are many institutions that come to the market with great business ideas, but they do not necessarily have a culture of risk management, controls and governance, and this can impact companies and risks to the system. “There are many companies, such as fintechs themselves, which are not necessarily regulated by the Brazilian Central Bank, but when they start looking for investors in the market, this investor wants to see in them governance similar to that of established financial institutions, with a risk management model, prudential regulation, controls, compliance and actions to ensure that the capital will be safe and well managed. Therefore, the topic ends up on the agenda of those companies that, in principle, would not have these obligations.”
The market movement generates demand and leads to regulation, with increasing demands on all institutions that, in one way or another, operate in the financial sector. “Many companies may not survive in the market because they are unable to adapt, mainly to the cost of regulatory compliance, so they need to be minimally prepared. When we talk about risk management, compliance and governance, they are intrinsic things directly related to the day-to-day operations and not dissociated or ancillary, as previously thought. The dissemination of this culture is very positive, as it contributes to the market continuing to be recognized for its high technical standards and solidity,” he concludes.
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