Banking midsized businesses in Brazil, a comparative analysis
We carried out a benchmark analysis of ten traditional and digital institutions and what they offer to medium-sized Brazilian companies.
Associate Managing Director – Fintech and Banking Lead
Historically, most Brazilians choose entrepreneurship out of necessity, not opportunity. This only started to change recently, with the number of people who became entrepreneurs because they needed a new source of income falling slightly from 50% in 2020 to 47% in 2022, according to the Global Entrepreneurship Monitor (GEM)1, a survey by Anegepe and Sebrae.2
Established by law in 2008, the concept of Individual Microentrepreneurs (MEI, the acronym in Portuguese) emerged to help many formalize their businesses. Through this law, MEIs can access benefits such as proof of income, credit, a simplified and cheaper tax system, and the ability to contribute to the pension system. By the end of 2021, there were over 13.2 million MEIs3 registered in Brazil, a significant increase from the 1.3 million MEIs in 2010, according to the latest available data by Brazil’s statistics institute IBGE.
This growing formalization combined with the regulation of payment institutions in 2013 paved the way for a better and cheaper banking experience for millions of entrepreneurs, offered by fintechs and later by traditional banks, which needed to catch up with the growing digitization of banking services. The growth of local SaaS platforms has also helped micro and small business owners to digitize their accounting and tax processes.
Medium-Size Companies’ Specific Banking Needs
Looking at the top of the banking customer pyramid, we see local corporations and multinationals reasonably well served by large regional and global banks, with good access to credit and capital markets. These companies usually have a properly automated process between their large ERP providers (e.g. SAP, Oracle) and their banking partners. The banking experience is highly tailored to clients and their large treasury and finance teams.
But when we examine the middle of the customer pyramid, we see the most underserved segment for banking solutions in Brazil: companies with a sales turnover from BRL 3M to BRL 300M (USD 600,000-60 million), which make up around 1% of businesses or nearly 70,000.4 With 50-499 employees, these companies have an operational and governance complexity that requires more robust financial solutions than those offered for individuals or small businesses.
In this article, we present some of the main insights from an analysis we carried out on 10 digital and traditional institutions (Itaú, Bradesco, Santander, BTG, BS2, Inter, C6, Conta Simples, Cora, and ASAAS) and what they offer to medium-sized companies.
Below, you will learn about how they are handling onboarding, the experience in digital channels, the client’s setup, credit and payment products, and customer service in general.
Customer onboarding is the digital experience that has most improved in recent years, thanks to the regulatory and fintech revolution in the country. Many banks can now offer a completely digital account opening process — some of them, such as Itaú, BTG, Cora, Conta Simples, and C6— do it in as little as 2 hours.
We found that the average number of fields to complete for the task was 19.2, but we also saw some players, like neobank C6, only asking for six fields — potentially because the business owner already had an individual bank account with them. C6 also created an onboarding feature that resembles a texting experience between the customer and the bank. Itau was also a top performer, with 13 fields.
Bradesco requested 36 information fields and at the end of the process stated that the potential client needed to go to a branch to complete the account opening process. They were the only bank to require this. Santander, in turn, did everything digitally, but it took 12 days to approve the account.
Digital Channels Experience
Mobile apps first reached the business banking sector to complement desktop solutions, for example, replacing the old physical tokens provided by banks. They later evolved to offer other value propositions. First, they greatly help CFOs and managers who need to view accounts and make remote approvals. Second, apps play an important role in security features such as biometric and web access (some banks require you to scan a QR code to log in from a desktop).
Now, the current trend is on-the-go services, such as initiating payments via Pix (Brazil’s instant payments system), QR code generation, bank slips issuance, investments and even tap-to-pay acquisition solutions. Among the institutions analyzed, the neobank Inter and the investment bank BTG stood out. Both provide an easy-to-use website and app and an overall digital product offering that makes them a complete banking solution, not only for micro businesses in Brazil but also for middle market clients. Both banks also have a straightforward solution to allow multiple users to access the same business account simultaneously and different levels of access that can be applied to them, creating a secure workflow.
Transactional Banking Offering and Client Setup
The immediate need for most companies is to move money in and out of their accounts. Most providers allow businesses to carry out transactions as soon as their accounts are approved. And we noticed that most institutions offer similar experiences regarding transfer limits configurations and other settings.
Additionally, most service providers offer physical and virtual cards (credit upon approval). In this case, Inter provides the best solution. Its card can also be used in digital wallets like Apple Pay.
From a spending management perspective, we believe Conta Simples has the most intuitive platform, allowing users to categorize their card expenses. We also realized it was possible to attach receipts within the account statement, which is a functionality that can help clients optimize reconciliation and control.
Inter got our special attention as well with published open APIs for SMB clients. BTG and BS2 also have the solutions published through their developer’s portal. Cora has an open API for partners like accountants, but we weren’t able to evaluate it.
Among traditional players, we believe Itaú has managed to combine user-friendly experiences in payments and receivables with a robust product portfolio. Payments can be entered individually, via batch files, or even host-to-host connectivity, making it best suited for companies of various sizes.
Access to credit is one of companies’ greatest needs. Traditional banks usually have a broader offering and appetite to lend when it comes to credit solutions, including uncollateralized loans. On the other hand, most fintechs first provide a credit card with low limits to be gradually increased as the customer shows income and payment capacity. And this is understandable, as large banks see this at a portfolio level and can accommodate defaults with higher interest rates.
One downside is that we haven’t seen any bank offering products to help entrepreneurs better understand and manage their cash flows or effectively using the transactional data to provide credit. This represents an opportunity for banks and fintechs alike to service this need.
From a user experience perspective, those who fared best were BS2 — Brazil’s first digital bank fully dedicated to business clients — and Inter. Among the incumbents, Itau has by far the most complete credit offering, ranging from collateralized loans to trade finance and more structured lines.
Payments Meet Banking
Very few banks have clearly combined the value proposition between card payment processing (offline and online) and banking services. Card acquiring and the related receivables financing are important products for retailers, e-commerce players, and smaller businesses.
We understand Itau and BS2 to have competitive offerings in this sense, but they still seem to be not fully integrated with the banking value proposition. BTG seems to be focused on the card receivable financing business, but we couldn’t find out more about acquiring. Inter and C6 seem to have a more integrated value proposition with multiple acquiring and receivables financing offerings. Both Inter and ASAAS — a Saas-based billing, payments and digital signage solutions hub for SMEs — offer payment links; we were unable to find a similar offering from other providers.
Customer service is noted as one of the biggest weaknesses in business banking. Businesses have more sensitive dynamics than individuals, mainly because the delay in incoming or outgoing transactions might have a major impact on the company’s performance (and survival).
Traditional banks usually rely on the relationship manager/branch service model. They also offer call center support which is usually used for technical questions (passwords, problems with platform access, etc.).
Digital players, on the other hand, offer customer service through WhatsApp or embedded chat solutions. There is a standing belief in the industry that clients want voice-based relationship support (e.g. call center or relationship manager), but research suggests they actually want to solve their issues quickly, preferably through digital tools5.
Most digital players also heavily rely on NPS (net promoting score) or CSAT (customer satisfaction score) metrics, which help them to keep a pulse on clients’ overall perception of services and products.
In this context, with three client services channels each, Itau (relationship manager, call center and email) and BTG (call center, chat, and email) stood out. Inter and C6, for example, only offer in-app chat as customer support.
Institutions Still Don’t Understand Their Middle Market Customers
Overall, we see that while traditional and digital banking solutions adequately serve large corporations and micro businesses, respectively, the middle segment remains notably underserved. This segment presents unique challenges that have not yet been fully addressed by existing banking solutions, mainly because encompassing a wide range of organizations with different revenue levels and operational structures translates into a clientele requiring service customization.
Bridging the gap for this underserved segment requires a nuanced understanding of their needs and organizational structures (e.g., how departmentalized they are), coupled with innovative solutions that leverage regulatory support, data analytics and technological capabilities such as Open APIs, Open Finance and third-party integrations (ERPs, SaaS, etc.).
Based on our mystery shopping initiative, we identified Inter, BTG, and BS2 as the best-positioned digital banking options for the middle market tier. Itau, in turn, has the most robust product offer and delivers user experience on par with or better than top-ranked digital banks, but is still making efforts to digitize its entire product shelf. Itaú, like other traditional banks, has increased its offering using a product-centric approach, which sometimes results in a very fragmented experience from a customer journey perspective.
Particularly in this segment, customers expect a more integrated and full-stack banking offering, as they have much more complex needs than small businesses, but do not operate with the same level of leverage and automation as a corporation. The journey towards achieving a more inclusive and tailored-made middle market banking experience in Brazil is ongoing, presenting opportunities for traditional financial institutions, fintech disruptors, and various software providers.
Want to know more? PCMI can help you better understand the Brazilian business banking landscape, with particular attention to product offerings, user experience, and the cost structure of available market participants. Feel free to reach out to us through this link and schedule a call.
Keep up to date with our e-commerce, payments and crypto insights:
- GEM, 2022. “Empreendedorismo no Brasil – Relatório executivo” ↩︎
- Anegepe is an association for studies in entrepreneurship and small business management Anegepe and Sebrae, a nonprofit association that supports medium-sized and small businesses. ↩︎
- IBGE News, 2023. “In 2021, Brazil had 13.2 million individual micro entrepreneurs (MEIs)” ↩︎
- Veja, 2022. “Estudo analisa crescimento das empresas brasileiras de médio porte” ↩︎
- E-commerce Brasil, 2021. “39% dos consumidores preferem atendimento digital pelo WhatsApp, mostra pesquisa” ↩︎