The Central Bank issued a rule that sets limits of 0.5% and 0.7% for interchange fees (TIC) for debit and prepaid cards, respectively. This fee is paid by card machine companies to banks and fintechs, and represents a relevant part of the billing of companies such as Nubank.
Until now, there was a cap of 0.8% per transaction on debit cards, with an average cumulative charge of 0.5%.
For prepaid, no limit was set — companies charged between 1.1% and 1.5%.
Another difference was the settlement period. Prepaid card issuers settled transactions in an average of 28 days, with a maximum term of 30 days.
During that period, they could apply the money and profit from it. The debt had to transfer the funds in two days.
With the new rules, settlement must be in two days for both debit and prepaid.
The Central Bank rules come into effect on April 1, 2023.
ICT is a percentage paid by acquirers (maquininhas companies) to card issuers (banks, administrators, fintechs) on each transaction.
Acquirers, however, do not fully absorb this cost — it is passed on to merchants, who, in turn, pass on to consumers.
Fintechs use prepaid cards
Talking about debit or prepaid cards may sound a little abstract — after all, the question we hear at the cashier is “debit or credit?”.
In fact, prepaid cards are used without the consumer noticing.
Some fintech and digital bank debit cards are not, strictly speaking, debit cards. They are prepaid cards, and their transactions are classified in this category by the machines.
For the customer, nothing changes: he swipes the card and the amount comes out of the account, as in debit. For the companies involved, there is this difference in fees and settlement time.
An important point of this difference is that ICT is a relevant source of fintech revenue. These companies rely on the tariff as a way of financing free services, until they find other means to monetize their business.
According to Nubank, 7% of its revenue between July 2021 and July 2022 came from there. If the ceiling were in effect, the company would have a 2.9% drop in revenues.
PagSeguro, on the other hand, estimates that its profit may vary by 1% up or down. The company operates at both ends, being both an acquirer, with its card machine business, and an issuer, with PagBank cards.
Who will pay this bill?
The Central Bank says the cap on ICTs aims to increase the efficiency of the payments ecosystem and encourage the use of cheaper forms of payment.
The BC’s idea is that, with the lower ICT, the machines will be able to charge less from the shopkeepers, who, in turn, will be able to reduce prices.
In the view of the regulatory authority, the model practiced today means that the higher cost of prepaid cards ends up penalizing all consumers, even those who use debit cards.
For fintechs, however, who will pay this bill is the… consumer.
Zetta, an organization that represents the sector and includes companies such as Nubank and Mercado Pago, says that ICT is an instrument used to finance free accounts used by about 90 million consumers.
During the discussion about the rules, the entity produced a study simulating a ceiling of 0.6% for the ICT of prepaid – lower value than the one defined by the BC, of 0.7%.
If the 0.6% limit had been in effect in 2021, customers would have paid BRL 24 billion more for services, according to Zetta’s calculations.
The argument is that, without the revenue from the interchange fee, fintechs would need to charge for services that are now free.
In its communiqué on the new rules, the Central Bank recognized the importance of fintechs “for the financial inclusion of the low-income population and for the digitalization of the payment activity, with the consequent reduction in the use of money to make payments”.
Therefore, the financial authority has set a higher limit for prepaid cards.