The commercial potential of Brazil’s forthcoming betting market has not gone unnoticed by operators. However, bookmakers are not the only stakeholders who stand to benefit, and fintechs should pay close attention to Latin American developments.
For many experienced operators and payments providers in the European and North American betting markets, there are some key factors to consider for Brazilian launch. Most significant among these is Pix, the instant payments platform managed by the Central Bank of Brazil (BCB).
Pix poses both a ‘challenge and an opportunity’ for fintechs, Richard Mifsud, CEO of UAE-based fintech Xprizo, shared with Payment Expert. For the licenced operator, the major benefit is that only local licence holders can gain access to Pix.
“It can be a very big showstopper but it’s also an opportunity, in that if you are doing things properly the opportunities are there on the table for you,” he said.
“It is a challenge but also an opportunity, not just for gaming companies but for fintech looking to use that one single platform.”
Due to being controlled by the Central Bank, the use of Pix also poses some security benefits to operators and fintechs. This is because users have already been verified by and gone through the appropriate checks and balances of the central authorities.
On the other hand, incoming operators and fintechs will also have to contend with different payment preferences among local consumers. In Europe, traditional banking is still dominant, alongside bank-to-bank payments, direct banking and instant banking.
In Brazil, conditions and preferences are different. In Mifsud’s view: “In Brazil it will be a very different scenario with using Pix which is an instant settlement solution, and obviously you would have some kind of overlapping cards as well.
“One shouldn’t discount the opportunity and potential of cryptocurrencies here as well. In a country like Brazil, it is likely there will be a mix of Pix, some cards and potentially some crypto as well, being used in the gaming sector.”
From Mifsud’s experience, the Brazilian betting space – and perhaps other Latin American jurisdictions too – bear are some strong resemblances to the African gambling markets, largely due to the use of central payments systems such as Pix.
The regulatory conditions Africa’s betting markets exist within are varied, and as a consequence interaction with local payment methods also differs from country to country.
“You have a mix of licenced operators and less licenced operators, and different regulatory regimes,” Mifsud observed. “In Kenya you need local regulation, and that’s how you can gain access to the local payment methods.
“We’re seeing more cryptocurrency, but the primary method of payment is still mobile money, Airtel, MPesa, M-Cash – they’re all based on some fintech space based on the telco operators. You need telco integration to run in Africa.”
The popularity of non-traditional payment methods is the major comparison that can be drawn between the South American and African betting sectors. Much of this is due to, in Mifsud’s view, these sectors being home to large numbers of unbanked populations.
With unbanked populations come an absence of card usage, and in the absence of widespread debit and credit card use, local payment methods are the preferred option, such as M-Pesa in a number of African markets like Kenya and Nigeria, Gcash in the Philippines, and of course, Pix in Brazil.
However, whilst this is a defining factor of both South American and African payments, and therefore betting, experiences, it is the main differentiator between these spaces and the European one.
For many operators, this is not necessarily a challenge but will certainly be a key factor to take into consideration. Focusing on the central topic of this article, Brazil, over 134 betting companies have expressed an interest in joining the market.
Of these companies, a huge number are founded, based and most experienced in Europe. This can also be seen in the membership of the Brazilian Institute of Responsible Gambling (IBJR), one of the first trade bodies for the yet-to-be-regulated market.
Notable Europe-founded firms with an interest in the sector are the UK’s bet365, Entain and Betway, Ireland’s Flutter Entertainment, and Sweden’s Betsson and LeoVegas – all founded in countries where traditional banking runs the roost, in stark contrast to Brazil and other emerging markets.
“The main thing is that traditional banking is a no go in these areas,” Mifsud said. “You have extensive populations and millions of people that are either under-banked or unbanked completely, so you can’t have direct banking solutions in place.
“You have a substantial amount of people without access to debit or credit cards, which is why you have local payment methods, like Pix, G-Cash and MyCash.”
Furthermore, with so many operators interested in joining the sector, there is one other factor that will be certain – competition, not just between the various high-profile international players wanting to secure a foothold in Brazil, but also local companies and state lottery operators.
This means that operators will need to work hard to differentiate themselves and stand out from the competition. This can of course come through marketing, and much has been made of the need for firms to personalise approaches to local players.
The product is also of course at the centre of this, and for the vast majority of customers is front and centre in their experience of a betting company and whether or not they continue to do business with it. But a fluid, smooth and accessible payments experience can also play a key role.
“When you have a very sports heavy operation, your product is very key because the margins will be tiny, especially when you have a lot of competition, but also from a payments perspective, the user journey is critical.
“Once you get a bad experience of too many clicks, or failed payments and so forth, you never see the player back on your sight. A very easy, fluid payments experience is critical for any operator that is operating anywhere in the world, but more especially in markets which tend to become very saturated at some point.”
Taking an overview of Brazil’s gambling sector, as mentioned at the start of this article, the opportunities for igaming in the country have been extensively realised and operators are working hard to ensure a piece of the pie, as it were, can be seized.
Payments firms too have taken note – two of the IBJR’s members are fintechs Pay4Fun and OKTO, for example – because as Payment Expert’s conversation with Mifsud revealed, forthcoming regulation and market launch poses just as big an opportunity for fintech as it does for bookmaking.