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Brazil is the country with the highest penetration in all of Latin America: 96% according to data from Banco Central and analysis by Americas Market Intelligence (AMI); this includes traditional bank accounts, digital accounts, and neobanks among the population over the age of 15. With respect to credit card ownership, Brazil has a surprising 37% penetration among the 15+ population.

Argentina is another leading country. Public data from Banco Central show 95% financial penetration among the population aged 15 and over, and 38% in credit card ownership during 2022.

Financial penetration (accounts and credit cards) in Brazil and Argentina.

Several factors have expanded financial inclusion in both countries. The most significant of these has been the rise of neobanks. These companies have provided people with financial services for the first time, particularly in Argentina. “A lot of people are looking to digitalize their financial experience. Many channels and players are also aiming to digitalize the buyer’s journey, as it is a way of improving the experience while reducing costs,” Juan Ignacio Talento, head of business development at the Argentine neobank Naranja X, told AMI in an exclusive interview.

Argentina, success of neobanks despite uncertainties

In Argentina, the leaders in digital accounts like Mercado Pago, Naranja X, BNA+, and MODO recorded 6, 6, 8, and 9 million active users, respectively, as of September 2022, according to their latest investor reports.

Amounts of users for the top neobanks in Argentina, in millions: Mercado Pago, MODO, BNA+, Naranja X, Cuenta DNI and Ualá.

In Argentina, the biggest challenge to overcome is its economic reality in terms of inflation. “Inflation is heating up and is expected to rise for the next 18 months. Inflation is even higher than interest rates, leading to negative real interest rates,” Talento explains. He adds, “wages and jobs are deteriorating, and the public debt refinancing risk is higher every month. In turn, the upcoming elections in 2023 are increasing the risk of sudden adjustments to macroeconomic imbalances.”

In this scenario, Naranja X’s strategic approach has focused on improving the finances of ordinary people, on the one hand, and on the other, strengthening SMEs. According to data compiled by the company, more than 60% of the Argentine population aged 18 and over lives on a monthly income of between AR$25,000 and AR$90,000 (US$191 – US$689). Purchasing power has also decreased by up to 13% in the informal sector, so efforts have been made to improve access to credit and loans.

According to the records of Naranja X, this digital bank has issued at least 10 million credit cards to 4.6 million users (each customer is allowed up to four cards). “Credit cards are Naranja X’s biggest business; in fact, we are known for this. We have our own card—the Naranja X credit card—but we also issue Visa, Mastercard, and AMEX cards. We have at least 67,000 active businesses per month, whom we call ‘Friend Businesses’ and an average monthly TPV (Total Payment Volume) of US$533 million,” says Talento.

Not only that, Naranja X has been implementing strategies that involve all the players in the ecosystem: from improvements in payment processing services to digital accounts that consolidate users’ financial activity, including loans and investments. Talento says, “We are part of the Galicia Financial Group, an ecosystem that includes a bank, Banco Galicia, an insurance company, Galicia Seguros, and two investment companies: Fondos Fima and Inviu.”


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Brazil, disruption of the financial ecosystem

Brazil is the undisputed e-commerce leader in Latin America—with a forecasted turnover of US$211 billion in 2022 according to exclusive data from the AMI E-commerce Data Library—which has no doubt been an extra factor in the success of some neobanks.

In Brazil, the leading neobank is still Nubank, with 67 million users. PicPay, a digital wallet, has 42 million users, and PagBank, another neobank, has 26 million, according to investor reports.

Amount of users for the top neobanks in Brazil, in millions: Nu, PicPay, PagBank, Inter and Iti.

Launched in 2019, PagBank is considered the second biggest neobank in Brazil after Nubank in terms of active users—if we leave out the e-wallet PicPay. “We began with 4.7 million active businesses in 2019. We now have 26 million, with the surprising fact that these are not only businesses, but also consumers. Our total deposits have increased 9-fold,” Éric Oliviera, chief investor relations and ESG officer of PagBank, told AMI.

PagBank, growth rates during 2029-2022: users, total deposits and credit portfolio.

As for the credit portfolio in Brazil, PagBank’s development has been convincing, although it is still limited. “We all found out what is was like to go through a tough pandemic, so we took a strategic decision to decrease credit, which has given us results. We are still only scratching the surface. More recently we created secured credit products in order to keep issuing credit, but with less risk: a credit card backed by certificates of deposit (CDs) issued by PagBank, which have one of the highest interest rates among banks and neobanks in Brazil; and also a credit card backed by account balances,” he says.

According to Oliviera, continuous analysis of the financial market and the instruments the population uses to make purchases is also important. “We have seen how at least 55% of purchases in Brazilian households, or rather transactions, are made using credit cards. When we look at the most developed countries in terms of card penetration, this number can reach 70% or 75%.” Oliviera says PagBank has already gone from a 1.2% market share in 2016 to a 10.6% share in 2022, influenced by the shift from cash to electronic payments, and by the mass financial inclusion of “micro-businesses.” PagBank’s services have, in turn, expanded to investments, insurance, a marketplace, card issuance, etc. In POS-terminals, PagBank analysts estimate they could top R$368 billion (US$71 billion) in 2022.

Moving Beyond the Data

Contact us if you are interested in gaining in-depth, detailed knowledge about the state of neobanks in Brazil, Argentina, and the rest of the region, as well as other relevant payment topics in Latin America: e-commerce, digital wallets, the crypto universe, Pix, and more.

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