After a recent regulatory change promoted by the Central Bank, on September 26 of this year, the monetary authority imposed a maximum limit on the Interchange Fee (TIC) of cards issued by Fintechs, as was already foreseen for bank cards.
BCB Resolution No. 246[1] stipulated a limit of 0.7% for fintech cards, while for bank cards the fee remains at 0.5% for debit transactions. In addition, it established the same deadline for making resources available to commercial establishments, regardless of the card being debit or prepaid. The measure will come into effect as of April 1, 2023.
The interchange fee is the remuneration paid to the card issuer for each transaction by the acquirer of the commercial establishment, who rents the machines to merchants. This is a model that has led to the creation of several fintechs in recent years and can be considered one of the main recipes in this business model.
Before this measure, the TIC (Interchange Fee) had no limit for Fintechs, so such a change could have a great impact on the reality of digital banks and institutions that issue a large volume of prepaid cards.
For traditional financial institutions, the creation of a maximum limit is nothing new, as it had already been defined by the Central Bank in 2018; the difference is that today the fee must observe an average of 0.5% with a ceiling of 0.8% for each operation. However, in 2023, the ceiling will be of 0.5% for transactions.
The issue of reducing the TIC (Interchange Fee) for prepaid and credit cards had been debated since last year, in public consultation 89 at the end of 2021. On the banks’ side, the intention was to create a ceiling for TIC (Interchange Fee) on prepaid cards (Fintechs) just as it was already practiced on debit cards (Bank) in order to equalize the regulatory treatment between sectors. At the time, the fintechs were against the proposal, justifying that it would impact their monetizations and business models.
In a way, the rule edited by the Central Bank establishes an intermediate solution in relation to the consultation. In a statement, the Central Bank says it has established a differentiated maximum limit for transactions involving debit and prepaid cards, “recognizing their importance for the financial inclusion of the lower-income population and for the digitization of payment activity, with the consequent reduction of using cash to make payments“.
The Brazilian Federation of Banks (Febraban) reported in a note that the Central Bank’s resolution represents an “important advance that contributes to reducing the asymmetries” of interchange fees, but points out that there are still competitive differentials. In another instance, it stated that the regulation of maximum tariff limits or price rules can produce, in the long run, “negative effects on the supply of products and services“.
The impact of the resolution will be greater for fintechs that have monoproducts and depend directly on the TIC (Interchange Fee), directly affecting the revenue indicator. In this scenario, it is interesting for companies to launch a product diversification solution, to prevent the sector’s business model from becoming unfeasible.
There is a concern in the market that setting a ceiling could reduce the offer of products in the long term and the amounts that financial institutions fail to collect might be passed on to the final consumer.
Several of the companies emerged with a business model based predominantly on monetization via TIC (Interchange Fee) and they will be the most impacted”, and fintechs will have to accelerate the development and launch of new products that have monetization potential. The Central Bank rule comes into effect on April 1, 2023, so startups will have just over 6 (six) months to adapt to the new scenario.
[1] https://www.in.gov.br/en/web/dou/-/instrucao-normativa-bcb-n-246-de-24-de-marco-de-2022-388636224
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Autor: Renata de Cássia Moraes Nicodemos • email: renata.nicodemos@hotmail.com • Tel.: +55 67 99234 3888
