Brazil: Recent Brazilian Central Bank Regulations Innovate The Brazilian Fintech Market

In the very final moments of 2018, BACEN enacted regulations and released communiqués that are expected to significantly impact the operations of online lenders and consequently the whole Brazilian payment and settlement infrastructure (Sistema Brasileiro de Pagamentos – SBP).

In such publications, it is noticeable that the regulator intends to innovate the means of payment market, providing it with new possibilities as well as with new players.

The referred innovations were introduced through the following provisions:

  • Resolution No. 4,707, of December 19, 2018 and Circular No. 3,924, of December 19, 2018, which discipline the use of payment arrangement receivables as collaterals for credit transactions.
  • Circular No. 3,925, of December 20, 2018, which amended the Annex to Circular No. 3.682, of November 4, 2013, which addresses the provision of payment service within the framework of the arrangements of the Brazilian Payment System.
  • Communiqué No. 32,927, dated December 21, 2018, which addressed the fundamental requirements for the Brazilian instant payment environment.

Specifically regarding the provisions set forth by Resolution No. 4.707 and by Circular No. 3.924, the regulator sought to simplify the access to credit to retailers, making it possible to use means of payment receivables as collaterals in credit transactions, especially credit card receivables.

Also innovatively, BACEN has defined the manner and the requirements for the acceptance of the receivables as collateral in credit transactions, presenting essential provisions that shall be implemented in credit agreements, such as the definition:

  1. of the institution that will settle the receivables for each payment arrangement;
  2. of the maximum daily amount that can be withheld, as provided for in the schedule of payment arrangement receivables; and
  3. of the conditions for the release of the financial resources to the transaction account of the receiving final user, including the proceeds from anticipation transactions.

Based on this information, it is possible to tie in the value of the receivables given as collateral to the debit balance of the credit operation, thus avoiding an excessive amount of collateral or the retailer anticipating any collateral surplus, granting the operation legal certainty.

Another topic of prominence is the possibility for the retailer to partially or totally anticipate its receivables from financial institutions that provide accreditation services, as well as from accredited and sub-accredited payment institutions.

Thus, aiming to assure transparency, centralize the transaction and ensure greater reliability to the credit transaction, the accrediting companies must settle the receivables used as collateral and provide their payment schedules to the financial institutions that are part of the respective credit transaction.

The rules laid down in Resolution No. 4,707 and in Circular No. 3,924 will come into force on January 31, 2019.

On the other hand, Circular No 3,925 introduces premises of governance and details further initiatives to promote interoperability in the means of payment market.

The governance provisions in the text reflect the duties of the setters of the payment arrangements, namely:

  1. introduce obligations to the creditor, which involves:
  1.  the control, specifically regarding the monitoring of the activities of the sub-accreditors; and
  2. the definition of the information to be provided by the underwriters to the creditor, in order to comply with operational obligations, risk management, fraud prevention, interoperability and others.
  1. the presentation of clear rules in their payment arrangement agreements, especially with regard to refunds of payment transactions, definition of clearing system and settlement of payment (when using systems of diverse participants of the arrangement), detecting of risks according to the rules/procedures and their management structure, conflict resolution organization, applicable penalties in the event of breach of contract, and minimum operational standards applied to the participants; and
  2. the presentation of a specific channel of communication with the participants of their payment arrangement, in the event that they do not fit into the closed payment arrangement modality. In addition, if the total value of transactions accumulated in the last 12 months of this payment arrangement exceeds 20 billion Brazilian Reais, the setter of the arrangement shall structure the communication through an electronic system.

The interoperability is a constant concern of the regulator, as observed in the above-mentioned Circular that obliges the insurer of an open payment arrangement to enter into bilateral agreement with closed payment arrangements through standardized contracts.

BACEN’s initiatives evidently seek to organize and clarify the responsibilities of each party to a mean of payment in Brazil, whether it is a payment arrangement, an accreditation institution, a sub-accreditation institution or even the end users of payments. These changes have a deadline for their application by the operators of this market, since BACEN demanded that all the settlors of the payment arrangements have their transactions regularized by March 29, 2019.

Finally, through the Communiqué No. 32,927, BACEN approves the fundamental requirements of an alternative mean of payment, the instant payment.

This provision comes as a pleasant surprise, especially since BACEN has finally established the main aspects of the structure of this new form of payment in which governance rules, forms of participation, operational and centralized settlement infrastructure, connectivity services and settlement provision stand out.

It is clear that the autarchy is concerned with the application of a flexible and open system of participation that grants financial inclusion as well as the advent of different structures, which may fit in the following ways as service providers:

  1. direct participation: financial institution or payment institution, which offers a transactional payment account to its clients and end users, and which has an account and connection to the centralized settlement infrastructure with BACEN;
  2. . indirect participation: financial or payment institution, which offers a transactional payment account to its clients and end users, but does not have an account, nor does it have a connection to the centralized settlement infrastructure with BACEN. In this case, the indirect participant must establish a service partnership with a direct participant, who will make their settlements; and
  3. participation as a payment initiation service provider: an institution that does not offer a transactional account to the end user, but offers a payment service in which the user utilizes the transactional account at another financial or payment institution. BACEN has stated that there will be a specific rule to establish the participation of this instant payment service provider.

It is also worth mentioning the participation of BACEN in this new mean of payment, intended to centralize the settlement infrastructure, operating these transactions one by one, 24/7 every day of the year.

The Brazilian means of payment market has shown positive changes, among which are major investments, in particular strategic sale of stakes of domestic companies to foreign groups, public offering of shares abroad (IPOs) and the entry of numerous startups.

These new rules reaffirm the objective of CMN and BACEN in seeking the constant development of the Brazilian means of payment market, as well as the promotion of financial inclusion. Regardless of the market’s natural evolution, the Brazilian government stimulates it even more through innovative initiatives, which encourage the improvement of this segment, present payment alternatives to retailers and consumers and enables the introduction of new companies and investments. Thus, it is advisable that the fintechs be aware of the regulatory changes and market demands, since new niches and business opportunities are emerging due to these much welcome regulatory advances.

Following the article published on November 2018, [Regulatory push spurs fintech forward in Brazil], the Brazilian Central Bank (BACEN) has been living up to the expectations set for the fintechs market in Brazil since its first statements on the matter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions