The Fintech’s Playground

XP’s IPO last week on Nasdaq, with a jump up more than 20% on its U.S. market debut (December 11), is the symbol of the arrival of a new era in the domestic financial market. This was a clear message to the country’s traditional financial institutions that innovation is a must. In this scenario, the Central Bank of Brazil (Bacen) launched at the end of November two important public consultations to promote the debate on technological innovations in the financial market, which has fostered Fintechs in the country. These are companies that work to innovate and optimize the services of financial institutions.

The first, Public Consultation No. 72/2019, is about the Regulatory Sandbox, which would be the creation of a controlled environment for testing financial and payment innovations. Just as playground sandboxes are an environment where children have fun and the socialization with other kids are tested, the idea of a regulatory sandbox is to allow companies that offer innovative products and / or services to operate within a pre-defined regulatory limit and under the supervision and evaluation of regulatory authorities. In this scenario, the flexibility of the rules is allowed, for a certain period and within the limits provided for in the proposed regulation, so that pre-selected companies act as an experiment in the already regulated sector, fomenting the development of new business models and the adoption of more modern and dynamic processes and systems; preserving, on the other hand, security, solidness and efficiency of the national financial system. It’s a test drive for innovation in the financial market!

In addition to the provisions regarding the regulatory sandbox, Bacen also launched Public Consultation No. 73/2019, which deals with the implementation of the Open Banking System. Aiming also at adapting to new business models, open banking allows data sharing between financial institutions, provided that there is the prior and express consent of the client and fulfilment of requirements already provided by current legislation on transparency and data processing.

Looking at the new proposals, we see an incentive from regulators to develop new business models. The modernization of the financial and capital markets is beneficial to the country’s economy, as it generates a more competitive and efficient environment. We have yet to await the final drafting and implementation of these new rules.

 By Luiza Martinez, associate at Candido Martins Advogados