Fintech Friday - fintech news round-up of the week

Highlights from the industry include news that fintech unicorn Transferwise has become profitable six years after being founded

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Brazil’s banks heading for massive attack by fintechs

A Goldman Sachs study says Brazil is experiencing a wave of growth in financial technology that will most likely eat into the market share of the country’s huge and long untouchable banks.

According to the New York Times the study estimates that the more than 200 financial technology companies in Brazil should generate a potential revenue pool of about $24bn over the next 10 years. Payments, lending and personal finance are three promising segments, as is insurance, the report found.

The impact from fintech disruption is expected to be greater in Brazil than in many other countries because of its highly concentrated banking sector, according to Goldman Sachs economists. A major driver for the disruption is “an oligopolistic market structure” in Brazil where the top five banks, excluding development banks, hold 84% of total loans. In retail branch banking, the top five banks have 90%.  That is up from 71% in 2007, the report says, adding “the market has become more concentrated since the financial crisis” of 2008.

By way of comparison, the newspaper notes that in the United States, the top five banks hold just about 20% of all branches. In India, that figure is slightly over 30%, and in Turkey it is just under 30%. Mexico and Russia are also less concentrated than Brazil. In Brazil, fees and interest rates for loans are also among the highest in the world.

“We believe this unique market structure positions fintechs to have a larger impact in Brazil than in other developed markets,” the report authors say.

 

Fintech unicorn TransferWise hits profitability milestone

Six years on from launch London-based money transfer start-up TransferWise has announced that it has finally reached profitability this calendar year and is “cash-generating”.

The company, recently valued at $1.1bn, says it’s currently seeing £8m per month in revenue, which extrapolates to a £100 million revenue run-rate, and is growing at 150% year-on-year. The platform is shifting a hefty £1bn every month, saving its customers, it claims, over £1.5m per day in foreign exchange fees.

The company is aiming to expand its offering but for now is keeping mum about its plans. Techcrunch suggests Transferwise could quite easily move into friend-to-friend or P2P payments within the same country, along the lines of Paypal’s Venmo or Barclays Pingit, given that it already has much of the required infrastructure in place. Another possibility is that it will launch its own debit card with low cost currency exchange when spending abroad.

Transferwise has raised around $117m Top tier backers include Andreessen Horowitz, Peter Thiel’s Valar Ventures, Sir Richard Branson, and most recently Baillie Gifford.

 

Chinese regulator to probe country’s booming fintech industry

 The extraordinary boom underway across the Chinese fintech industry has prompted the country's main financial regulator, the People's Bank of China (PBOC), to take a more formal interest in the sector.

According to Business Insider, the PBOC has set up a fintech committee in order to research and better understand the impact of the sector on financial markets, wider financial stability, monetary policy, and payments and clearing.

In addition to boosting fintech research, the regulator will increase its own use of technology to improve supervision, likely in order to keep up with the pace of change. It also wants to "guide" the use of technology in financial services, and create new ways to manage innovation, according to the statement released announcing the launch of the committee. While the PBOC has no immediate plans to create new regulations, the move indicates they are likely coming down the line.