In the very final moments of 2018, BACEN enacted regulations and released communiqués that are expected to significantly impact the operations of online lenders and consequently the whole Brazilian payment and settlement infrastructure (Sistema Brasileiro de Pagamentos – SBP).
In such publications, it is noticeable that the regulator intends to innovate the means of payment market, providing it with new possibilities as well as with new players.
The referred innovations were introduced through the following provisions:
- Resolution No. 4,707, of December 19, 2018 and Circular No. 3,924, of December 19, 2018, which discipline the use of payment arrangement receivables as collaterals for credit transactions.
- Circular No. 3,925, of December 20, 2018, which amended the Annex to Circular No. 3.682, of November 4, 2013, which addresses the provision of payment service within the framework of the arrangements of the Brazilian Payment System.
- Communiqué No. 32,927, dated December 21, 2018, which addressed the fundamental requirements for the Brazilian instant payment environment.
Specifically regarding the provisions set forth by Resolution No. 4.707 and by Circular No. 3.924, the regulator sought to simplify the access to credit to retailers, making it possible to use means of payment receivables as collaterals in credit transactions, especially credit card receivables.
Also innovatively, BACEN has defined the manner and the requirements for the acceptance of the receivables as collateral in credit transactions, presenting essential provisions that shall be implemented in credit agreements, such as the definition:
- of the institution that will settle the receivables for each payment arrangement;
- of the maximum daily amount that can be withheld, as provided for in the schedule of payment arrangement receivables; and
- of the conditions for the release of the financial resources to the transaction account of the receiving final user, including the proceeds from anticipation transactions.
Based on this information, it is possible to tie in the value of the receivables given as collateral to the debit balance of the credit operation, thus avoiding an excessive amount of collateral or the retailer anticipating any collateral surplus, granting the operation legal certainty.
Another topic of prominence is the possibility for the retailer to partially or totally anticipate its receivables from financial institutions that provide accreditation services, as well as from accredited and sub-accredited payment institutions.
Thus, aiming to assure transparency, centralize the transaction and ensure greater reliability to the credit transaction, the accrediting companies must settle the receivables used as collateral and provide their payment schedules to the financial institutions that are part of the respective credit transaction.
The rules laid down in Resolution No. 4,707 and in Circular No. 3,924 will come into force on January 31, 2019.
On the other hand, Circular No 3,925 introduces premises of governance and details further initiatives to promote interoperability in the means of payment market.
The governance provisions in the text reflect the duties of the setters of the payment arrangements, namely:
- introduce obligations to the creditor, which involves:
- the control, specifically regarding the monitoring of the activities of the sub-accreditors; and
- the definition of the information to be provided by the underwriters to the creditor, in order to comply with operational obligations, risk management, fraud prevention, interoperability and others.
- the presentation of clear rules in their payment arrangement agreements, especially with regard to refunds of payment transactions, definition of clearing system and settlement of payment (when using systems of diverse participants of the arrangement), detecting of risks according to the rules/procedures and their management structure, conflict resolution organization, applicable penalties in the event of breach of contract, and minimum operational standards applied to the participants; and
- the presentation of a specific channel of communication with the participants of their payment arrangement, in the event that they do not fit into the closed payment arrangement modality. In addition, if the total value of transactions accumulated in the last 12 months of this payment arrangement exceeds 20 billion Brazilian Reais, the setter of the arrangement shall structure the communication through an electronic system.
The interoperability is a constant concern of the regulator, as observed in the above-mentioned Circular that obliges the insurer of an open payment arrangement to enter into bilateral agreement with closed payment arrangements through standardized contracts.
BACEN’s initiatives evidently seek to organize and clarify the responsibilities of each party to a mean of payment in Brazil, whether it is a payment arrangement, an accreditation institution, a sub-accreditation institution or even the end users of payments. These changes have a deadline for their application by the operators of this market, since BACEN demanded that all the settlors of the payment arrangements have their transactions regularized by March 29, 2019.
Finally, through the Communiqué No. 32,927, BACEN approves the fundamental requirements of an alternative mean of payment, the instant payment.
This provision comes as a pleasant surprise, especially since BACEN has finally established the main aspects of the structure of this new form of payment in which governance rules, forms of participation, operational and centralized settlement infrastructure, connectivity services and settlement provision stand out.
It is clear that the autarchy is concerned with the application of a flexible and open system of participation that grants financial inclusion as well as the advent of different structures, which may fit in the following ways as service providers:
- direct participation: financial institution or payment institution, which offers a transactional payment account to its clients and end users, and which has an account and connection to the centralized settlement infrastructure with BACEN;
- . indirect participation: financial or payment institution, which offers a transactional payment account to its clients and end users, but does not have an account, nor does it have a connection to the centralized settlement infrastructure with BACEN. In this case, the indirect participant must establish a service partnership with a direct participant, who will make their settlements; and
- participation as a payment initiation service provider: an institution that does not offer a transactional account to the end user, but offers a payment service in which the user utilizes the transactional account at another financial or payment institution. BACEN has stated that there will be a specific rule to establish the participation of this instant payment service provider.
It is also worth mentioning the participation of BACEN in this new mean of payment, intended to centralize the settlement infrastructure, operating these transactions one by one, 24/7 every day of the year.
The Brazilian means of payment market has shown positive changes, among which are major investments, in particular strategic sale of stakes of domestic companies to foreign groups, public offering of shares abroad (IPOs) and the entry of numerous startups.
These new rules reaffirm the objective of CMN and BACEN in seeking the constant development of the Brazilian means of payment market, as well as the promotion of financial inclusion. Regardless of the market’s natural evolution, the Brazilian government stimulates it even more through innovative initiatives, which encourage the improvement of this segment, present payment alternatives to retailers and consumers and enables the introduction of new companies and investments. Thus, it is advisable that the fintechs be aware of the regulatory changes and market demands, since new niches and business opportunities are emerging due to these much welcome regulatory advances.
Following the article published on November 2018, [Regulatory push spurs fintech forward in Brazil], the Brazilian Central Bank (BACEN) has been living up to the expectations set for the fintechs market in Brazil since its first statements on the matter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.