The International Monetary Fund released an IMF Working Paper assessing how the rise of fintech lenders in Brazil has affected commercial banks’ pricing and performance. Using Brazilian bank-level credit and balance sheet data, it finds incumbent banks largely maintained loan portfolios by cutting lending rates, which compressed net interest margins and reduced profitability even as operational efficiency improved, with no clear evidence of higher risk-taking. The paper constructs a bank-specific “Bartik” (shift-share) exposure measure based on fintech market share by credit segment and banks’ pre-fintech loan portfolio composition, then estimates causal effects for commercial banks. A one standard deviation increase in fintech competition exposure is associated with a 3.7 percentage point fall in average lending rates, a 1.3 percentage point decline in net interest margins, and a 0.5 percentage point reduction in the administrative cost-to-asset ratio; profitability falls by 3.6 percentage points in return on equity and 0.7 percentage points in return on assets. Higher exposure is linked to a 32% drop in borrower numbers alongside a 32% rise in loans per borrower, leaving overall loan volumes broadly stable, while effects on non-performing loan and provisioning ratios are not statistically significant; over 2018–2024, fintech competition is estimated to have lowered average lending rates by 2.7 percentage points and net interest margins by 0.9 percentage points. The paper notes that competitive pressure may broaden beyond unsecured consumer credit, citing a March 2025 reform that simplified private-sector payroll-guaranteed lending via a centralized government app and ongoing development of credit portability within open finance, which it describes as lowering entry barriers for fintech lenders.
International Monetary Fund 2026-01-16
International Monetary Fund publishes research linking fintech competition in Brazil to lower bank lending rates and narrower margins
The IMF's Working Paper analyzes fintech lenders' impact on Brazilian banks, showing increased competition reduced lending rates, compressed net interest margins, and decreased profitability. A 3.7 percentage point drop in lending rates and a 1.3 percentage point decline in net interest margins per standard deviation increase in fintech competition were noted, with fintech competition estimated to lower average lending rates by 2.7 percentage points from 2018 to 2024.