The fintech and payments sector has been growing tremendously in the last five years in Brazil, especially in the cross-border field. What do you think could be the prospects and reasons for this growth?
Recent developments in the FX regulation space in Brazil will bring important changes in the way cross-border payments are made. Historically, cross-border payment solutions in Brazil date back more than a decade when the use of international credit cards and foreign ecommerce began to have a greater structure to start sales in the country.
However, this solution was not the most appropriate because the level of conversion in payments was low, since the level of rejection, especially in high-risk industries, was very high. Another problem was that the people who were interested in international ecommerce did not own an international credit card, and many of them did not even have a bank account.
Much has evolved since then with the fintech companies, also known in Brazil as facilitators of international payments – financial companies with a focus on helping international companies send or receive funds in the country.
What is the role of an international payment facilitator?
The Brazilian exchange regulation first established in 1920, which encompasses more than 40 laws, tried to keep up with the technological developments and payments that were modernised to meet this new economy. However, the regulation did not have (in a clear and unified way) guidelines for the operation of each player, in many cases receiving harsh criticism from industry associations for the lack of competitive equity.
For approximately a decade, facilitators operated through the regulation circulars or even under legal opinions. Furthermore, the service of remittances could only be provided by financial institutions already authorised to operate in the Brazilian market, yet they were not necessarily specialised in this area.
However, in recent years, with a significant increase in the volume of cross-border payments further stimulated by the pandemic, payment solutions have become more common, drawing the regulators’ attention. The lack of technological and instantaneous remittance solutions also contributed to the need for more players in the market and regulatory changes.
The adequacy of the exchange regulation was met in less than a year. The Central Bank of Brazil (BACEN) created the guidelines and had discussions with the market through a public consultation, where associations, banks, fintechs, and foreign exchange brokers could provide their opinion on drawing the new rules. In order to encourage competitiveness among different players and equity between their rules of operation, BACEN made the change in regulation, introducing a new entity called eFX.
eFX is an international service of payments or transfers in the foreign exchange (FX) market that aims to harmonise the regulation on the use of international credit cards and international payment facilitation businesses. With this, the regulator expanded the payment services for international transfers, consolidating the rules for its provision, specifically for the acquisition of goods and services in person or by electronic means, remittances, transfers between same ownership and international cash out in the country or abroad, also allowing the use of bank slips (boleto bancário).
The new, more transparent regulatory environment has streamlined cross-border payments processing. Apart from large, established businesses, what other parties could benefit from the booming cross-border payments sector?
With the new rules in place, players and consumers have a broader choice of services, since the rules established by the regulator strive to increase competition while maintaining the characteristics of the institutions. The changes regard the following:
foreign exchange operations above USD 300,000 may be carried out by authorised financial institutions/banks;
foreign exchange operations between USD 100,000 and USD 300,000 can be carried out by banks, brokers, and distributors;
foreign exchange operations up to USD 100,000 may be carried out by all authorised institutions and the eFX.
The different limits segregate the possible operations in each institution and meet the different needs of each client, stimulating the specialisation in the services offered by different suppliers. Further evolution and specialisation are still to come, and the winners are the customers, who are able to count on increasingly specialised services. In the context of eFXs, they will be able to count on more technological services, with greater transparency in the payment flows, pricing, agility in processing payments, and cost reduction.
What is WePayOut’s unique approach for the cross-border payments industry in Brazil?
As an eFX, WePayOut is a cross-border instant payments specialist who is allowed to perform operations of up to USD 10,000 per order. This limit alone establishes the type of service that the company can offer, which fits perfectly into the mass payments processing with the registration of the operation taking place in a consolidated way. This is the main characteristic of international payment facilitators, now eFX, says the regulator, and this is what sets them apart from traditional exchange brokers enabling cost savings for customers who are consumers of goods and services outside the country.
WePayOut currently provides a full range of services to international companies selling products in Brazil. However, for remittance companies, it is allowed to operate as a technological and service layer, without the possibility of offering full capacity – for example, paying and collecting funds via Pix 24x7, including holidays, or offering tools to increase payments conversion.
Under the new regulation, companies such as WePayOut will be able to apply for an authorisation to operate as eFX and carry out FX operations for themselves from 1 September 2022. As an authorised eFX, they will be able to offer all the technological capabilities and 24x7 instant payments, also for remittance companies that are paying or collecting funds in Brazil – today only allowed to banks and brokers.
This interview was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
About Fernanda Zago
With more than 10 years of experience in cross-border payments, Fernanda became a reference in the Brazilian payments market for having been one of the pioneers in the implementation of a new operational model in the international payment facilitation sector, developing it through strategic partnerships. She is currently the CEO of WePayOut, seeking to establish the brand in the Brazilian and international markets as a fintech specialised in instant payments to and from the Brazilian market.
About WePayOut
WePayOut provides a full range of solutions to international companies selling products and services in Brazil. The company is the unique Brazilian eFX specialised in instant cross-border payments that operates in the mass payments sector, helping international companies to instantly pay or collect in local currency in the region.
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