Brazil's central bank to limit prepaid card interchange fee in setback for fintechs (updated)

Banco Santander Brasil SA

26/09/2022 14:44

(Adds details, context)
       BRASILIA, Sept 26 (Reuters) - Brazil's central bank on
Monday said it would set a 0.7% limit for interchange fees for
prepaid cards, which are offered by fintechs in free digital
accounts, in a setback for the booming sector in Latin America's
largest economy. 
    The central bank had put the issue out for public
consultation last year, but its proposal suggested a maximum
rate of 0.5% for both debit and prepaid cards, which would be
even more damaging to fintechs.
    Banks' debit card interchange fees, which currently have to
comply with a joint weighted average calculation of 0.5% and
maximum value per transaction of 0.8%, will now be capped only
by 0.5% per transaction.
    An interchange fee is a charge a merchant pays to the
card-issuing bank every time a consumer swipes their card.
    The changes will take effect from April 2023, and will also
standardize the settlement term for debit and prepaid card
transactions.
    According to the central bank, the changes will "increase
the efficiency of the payments ecosystem, encourage the use of
cheaper payment instruments, enabling the reduction of costs for
stores to accept these cards."
    Banks had pressed the regulator to set a limit for
interchange fees in prepaid cards on the grounds that there
should be greater equality in treatment, especially after the
dizzying rise of fintechs and their digital accounts. 
    There is currently no limit on the rate for prepaid cards,
which is usually higher than that charged in transactions with
debit cards, representing an important source of revenue for
fintechs.
    A study released this year by the Zetta association, which
represents companies such as Nubank  NUN.N  and Mercado Pago,
estimated that if a 0.6% cap were in effect in 2021, fintech
customers would have paid an additional 24 billion reais ($4.51
billion) in service charges.  urn:newsml:reuters.com:*:nL1N2YL0WQ
    Nubank said in a statement that interchange fees on prepaid
cards accounted for 7% of its revenue in the year to June 30. If
the changes had been in effect, its revenue would have been
affected by 2.9%, it said. 
    ($1 = 5.3165 reais)
 (Reporting by Isabel Versiani and Marcela Ayres; editing by
Steven Grattan anmd Jason Neely)
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