The times are changing and businesses want to reach global markets. The increasing interactions and transactions with people around the globe. All this is supported by the latest advancement in communications and information technology. The major driving forces behind globalization are “shipping, data, and capital flows”, businesses can use these to their advantage to enter new markets.
Expanding to new markets, leveraging existing technologies, and building a loyal customer base are challenging with great rewards. Banks and financial services institutions offering services to the unbanked and underbanked face several challenges while entering new markets.
Doing business internationally is difficult compared to operating domestically. Apart from cultural and language barriers, businesses need to comply with multiple regulations that they’re unfamiliar with. So, what does a business consider before trying to do business in other countries? To make the transition to new countries easier, we at DIRO have decided to offer insights on what it takes to enter new markets. In this guide, we’ll be sharing all the information necessary about doing business in Brazil.
Doing Business in Brazil
Brazil has a huge population and it has all the pillars that support a strong digital economy. A large portion of the population is equipped with fast internet connectivity and smartphones. To give you an idea, Brazil has the second-highest number of Facebook and Twitter users. What makes their digital economy even stronger is that it has more smartphones than people.
Most of the population is youthful and is up for new technology adoption. 85% of the population lives in urban areas. When it comes to entrepreneurship, Brazil is one of the top entrepreneurial countries in the world.
Brazil Stats:
- Population: 212 million
- Median Age: 32
- GDP: $1.868 trillion
- GDP growth: 1.8%
- Income per capita: $12,300
- Internet access: 70.2%
- Smartphones: 44%
1. FinTechs
One indicator of Brazil’s financial growth is the number of FinTech companies. In 2019, 380 FinTech companies were successfully running their business in Brazil. The biggest name out of them all is Nubank, as they reported opening 1.5 million digital savings accounts first 6 months of their operations in 2018. Already 64% of the Brazilian population has adopted some type of FinTech.
2. Digital Payments
In 2020, the total transaction value for digital payments was over $50 billion. Combining that with an annual growth rate of 11.8 percent, the value is expected to cross the $75 billion mark in 2023.
3. mCommerce
As we mentioned above, Brazil has a huge number of smartphone users. With the significant use of smartphones, and the youthful tech-friendly population, the mCommerce industry can grow.
4. Cybercrime
With the high number of smartphone users, the rate of cybercrime is high in Brazil. 76% of the Brazilian population have reported that they’ve been personally affected by cybercrime. The rate of cybercrime is the highest out of all countries. This may be a major challenge for banks and financial services providers trying to enter the market.
Current Situation of AML/KYC in Brazil
1. Anti-Money Laundering
Brazil is a member of the FATF and has had AML laws since 1998. Although, the FATF has great concerns about deficiencies identified in its June 2010 mutual evaluation report. While Brazil didn’t implement necessary changes, in 2019 the FATF mentioned its concerns regarding Brazil not being able to keep up with international standards to prevent money laundering and terrorist financing.
2. Regulators
When it comes to regulatory bodies in Brazil, there are 3 main regulatory bodies. These regulatory bodies are in charge of implementing and amending AML and KYC laws. The bodies are the Central Bank, CVM (Brazilian Securities and Exchange Commission), and Financial Activities Control Council (COAF).
3. RagTech
Regulatory bodies and industry leaders are in favor of innovation in the compliance industry to streamline the process. Using machine learning and artificial intelligence algorithms to improve the compliance process for both customers and businesses is in the works.
4. Data Protection
The Brazilian General Data Protection Law (LGPD) was released in 2018. Brazil’s first data protection regulation is largely aligned with the EU’s GDPS (General Data Protection Act).
Identity Requirements and Systems
Brazil has two different Identity systems.
- Registro Geral (RG)
- Cadastro de Pessoas Físicas (CPF)
The Registro Geral is the official national ID document and it contains a person’s official ID document, containing a person’s name, DOB, parent’s names, signature, thumbprint, and a unique number. Since 2017, the RG cards are machine-readable.
The Cadastro de Pessoas Físicas (CPF) is a federal taxpayer number for Brazilian and other residents. The government has recently issued an e-CPF, a digital document that can be used as a publicly provided cryptographed signature key.
Brazil had planned to launch a more sophisticated digital ID program in 2019. The National Identification Document (DNI) connects to a national database of biometric information collected from 100 million Brazilians.
However, the plans for DNI were put on hold due to an internal dispute.
