A Reuters announcement details that said decisions will include one regarding revolving credit card rates, which are known to be the interest that consumers are required to pay whenever they are unable to carry out their credit card bills payment in full, pushing such unpaid amounts into future instalments.
Based on the information provided in the news article, providing insights ahead of a meeting with the Brazilian banking federation, Haddad advised that the ministry is going to launch 14 measures that look to better the credit environment. Per the official, revolving credit card issues are believed to lie at the core of the increasing indebtedness among Brazilians.
The discussions are set to centre on high credit card interest rates, which Haddad described as being a widespread burden that is ‘charged to the population’, as the design of current interest rates for credit cards is harmful towards the low-income population in Brazil. The Finance Minister further stated that an extensive part of the population that is currently in the credit bureau is found in this position because of credit cards.
The announcement further details that the revolving credit card interest rate in the region is 417.4% per annum, as per the most up-to-date data from the central bank, which situates it as being the most expensive type of credit that is targeting individuals.
Consumers are required to abide by this fee whenever they do not carry out payments of the entire credit card bill, with the remaining amount being subject to interest. What is more, as per the Reuters article information, the central bank established back in 2017 that consumers would be restricted to a maximum of 30 days on the revolving credit card line.
Following this period, banks are mandated to offer increasingly cost-effective credit options of the likes of credit card instalments, which carry an annual interest rate of 189.6%.
Within this context, Goldman Sachs analysts have the belief that the implementation of a cap on revolving credit card rates could bring forth challenges because of the widespread usage of interest-free instalments.
Research from ReportLinker highlights that the number of bank accounts in Brazil is expected to reach 1.3 billion by 2026, which marks an approximate 26% decrease from the 2021 amount of 6.6 billion accounts, as the country has seen a drop of 13% year on year from 2012 onwards. What is more, in 2021, Brazil ranked 18th globally in terms of the number of bank accounts. What is more, when talking about credit card holders, the region ranks 37th in the world, standing at 27.03%, as per World Bank data.
As more than 30 million people are unbanked, fintechs are known to be contributors towards financial inclusion, providing prepaid accounts, credit products, and digital wallets, amongst others. Furthermore, the launch of the region’s instant payment method Pix marked an important step in democratising access to financial services and has been experiencing exponential growth within ecommerce.
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