BRASILIA (Reuters) – Brazil’s central bank said on Monday it would cut a 0.7 percent limit on interchange fees for prepaid cards, which financial technology companies offer in free digital accounts, in a setback for the booming sector in Latin America’s largest economy.
The central bank brought the issue up for consultation last year, but its proposal suggested a maximum rate of 0.5% for both debit and prepaid cards, which would be more detrimental to fintech companies.
Bank debit card exchange fees, which must currently comply with a common weighted average of 0.5% and a maximum value of 0.8% per transaction, will now be capped at just 0.5% per transaction.
An exchange fee is a fee that a merchant pays to the card-issuing bank each time a consumer swipes their card.
The changes will take effect from April 2023, and will also standardize settlement terms for debit card and prepaid card transactions.
According to the Central Bank, the changes “will increase the efficiency of the payment system, encourage the use of cheaper payment instruments, which will make it possible to reduce the costs incurred by stores for accepting these cards.”
Banks lobbied the regulator to put an end to interchange fees on prepaid cards on the grounds that there should be more equal treatment, especially after the staggering rise of fintech companies and their digital accounts.
There is currently no price limit for prepaid cards, which is usually higher than the price charged for transactions with debit cards, which is a significant source of revenue for fintech companies.
A study released this year by the Zetta Association, which represents companies like Nubank and Mercado Pago, estimated that if the 0.6% cap were to take effect in 2021, fintech customers would pay 24 billion reais ($4.51 billion) in additional service fees. .
Nobank said in a statement that exchange fees on prepaid cards accounted for 7% of its revenue in the year ended June 30. It added that if the changes had been in place, its revenue would have been affected by 2.9%.
(1 dollar = 5.3165 riyals)