Brazil’s fintech innovation has been incredibly disruptive and supportive so far, bringing financial inclusion to millions of Brazilians. Nubank’s Recomeço program, which provides up to 99.9% debt relief, may seem like a lifeline. Capim’s Buy Now, Pay Later (BNPL) for dental care makes basic services accessible, allowing patients to prioritize their health. Are these innovations really freeing up Brazilians to better use their time, or just insidiously designing alternative dependencies, alternative debt traps? This isn't just about algorithms and venture capital; it's about people's lives.
The allure of digital credit is undeniable. It’s quick, it’s easy, it’s the democratization of finance. Wealthier consumers benefit from Nubank’s NuScore, a new credit rating tool that promises transparency by giving users a credit score along with the information they need to improve it. Think about the factors that influence that score: credit card usage, savings habits, debt levels. Isn’t this just a high-tech version of the same old extractive game? Those who are already marginalized and struggling financially are more likely to have lower scores, continuing the cycle of exclusion. It’s a virtualized, digitalized version of the bad things in the incumbent banking ecosystem, but somehow faster and perhaps more insidious.
Financial Freedom's Price Tag High?
Instead we’re told that it is all about financial literacy. Nubank offers resources. But how useful are these resources when a person is under acute financial stress today? When the priority is feeding the family, financial literacy often becomes a distant thought. Keeping track of a credit card can naturally get lost in the shuffle. Let’s not kid ourselves about who is holding the power in this situation. Fintechs are businesses, after all, and many of them know that their success is built on generating revenue.
Capim’s BNPL model for dental services stands out as an especially intriguing approach. As families prioritize basic needs, dental care can be an afterthought—more so for low-income families. Providing a mechanism to help them better afford the up-front cost is an alluringly powerful pitch. What do you do when someone falls short in making those monthly payments? When does a toothache become a debt crisis? What are the interest rates? What are the penalties? Are they being made aware of these risks in advance, prior to signing up?
A Smile Now, A Bill Later?
Take Maria, a single mom who has two jobs on the side. She already has some dental work she needs done, but can’t afford to pay the dentist up front. Capim's BNPL seems like a godsend. She receives the care that she deserves, her smile is healed, and she knows there’s no limit to what she can accomplish. A few months later, an emergency car repair or a new furnace gets her budget derailed. She misses a payment. Late fees accrue, and her credit score suffers. What once felt like a godsend becomes a staggering burden. Is this really the story we want to leave unwritten for millions of Brazilians?
The question isn't whether fintech is good or bad, but how it's implemented. What we need instead is a much more critical examination of the algorithms and business models that engines these companies. Are these systems really built to enable people to execute their will? Or are they more narrowly interested in driving up their bottom line, regardless of the societal costs?
Ethics In the Algorithm?
For Méliuz, another Brazilian fintech, it’s even thinking about adding more bitcoin to its balance sheet. If successful, it’ll be a highly profitable move, but it’s a reminder of the overall volatility and dangers associated with the crypto-space. Are these fintechs really looking out for their customers’ best interests? Or are they just driving towards the next big shiny object without regard for the potential calamity?
These are not merely Brazilian issues. These are global issues. The emergence of fintech as a disruptive force is altering the financial landscape around the globe. Let’s learn from Brazil’s successes and missteps. We need to ensure that we apply these innovations in responsible, ethical ways and never lose sight of placing social good with the highest priority. We do need regulation, of course, but more importantly we need a complete change in how we think about this work. It’s time to get past the hype and start asking the tough questions. We need to make sure that financial inclusion doesn’t just mean inclusion in exploitation.
It’s time to stop accepting scraps from the fintech revolution. The future of finance depends on it.
It's time to demand better from the fintech revolution. The future of finance depends on it.
