Fintechs Stung by High Brazil Rates as Big Banks Contain Fallout
- Inflation and slower growth also increase delinquency risks
- StoneCo, PagSeguro and Nubank are facing new challenges
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Brazil’s massive interest-rate hikes are hampering the business model for financial technology firms including Warren Buffett-backed StoneCo Ltd. and PagSeguro Digital Ltd., who had been offering cheaper loans and services than big banks and growing at a furious clip.
The fintech industry, which exploded in recent years with record venture capital investments and public equity sales, is suddenly facing a reckoning, as Brazil’s central bank jacked its key rate up by nearly 10 percentage points in a year to combat inflation. That’s making it harder to offer competitive rates on loans without compromising already tight profit margins.