Brazil’s central bank to limit prepaid card exchange fees as fintechs fail Reuters

BRASILIA (Reuters) – Brazil’s central bank said on Monday it would set a 0.7% cap on interchange fees for prepaid cards offered by fintech with free digital accounts, a setback for a growing sector in Latin America’s biggest economy.

The central bank put the issue out for public consultation last year, but the proposal suggested a maximum rate of 0.5% for both debit and prepaid cards, which is more damaging to fintechs.

Banks’ debit card interchange fees, currently at a weighted average of 0.5% and a maximum charge of 0.8% per transaction, will now be capped at 0.5% per transaction.

A interchange fee is a fee the merchant pays the card-issuing bank each time a consumer swipes the card.

The changes will come into effect from April 2023, and will also standardize settlement times for debit and prepaid card transactions.

According to the central bank, the changes “increase the efficiency of the payments ecosystem, encourage the use of cheaper payment tools, allow to reduce costs for stores to accept these cards.”

Banks have been pushing the regulator to set a cap on interchange fees for payments in prepaid cards, saying there should be more equality in the treatment, especially after fintech and digital accounts have been on the decline.

Currently, there is no limit for prepaid cards, which are usually higher than those paid for transactions with debit cards, which represents an important source of income for fintechs.

A study released this year by the Zeta Association, which represents companies such as Nubank and Mercado Pago, found that fintech customers would pay an additional 24 billion reais ($4.51 billion) in service fees if the 0.6% cap is implemented by 2021. .

Nubank said in a statement that interchange fees on prepaid cards accounted for 7% of revenue in the year to June 30. Had the changes been implemented, revenue would have been hit by 2.9%, he said.

($1 = 5.3165 riels)