Fintech Competition and Banks’ Shrinking Margins in Brazil
IMF Working Papers, January 16, 2026
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- Fintech Competition and Banks’ Shrinking Margins in Brazil
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Bibliographic details
- Authors: Rui Xu
- Published: January 16, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229037075.001
Summary
- The rise of fintech lenders has intensified competition in the banking industry in Brazil.
- The study examines the causal impact of increased fintech competition on commercial banks’ lending rates and profitability using Brazilian bank-level data.
- Employs a bank-specific Bartik exposure constructed from comprehensive credit and balance sheet information across all Brazilian banks and fintech lenders.
Methodology
- Identification strategy: bank-specific Bartik exposure based on credit and balance sheet information across all Brazilian banks and fintech lenders.
- Data scope: Brazilian bank-level data (period explicitly summarized includes 2018–2024).
Key findings
- A one standard deviation increase in fintech competition exposure corresponds to a 3.7 percentage point reduction in average lending rates at commercial banks.
- Between 2018 and 2024, fintech competition is estimated to have:
- lowered banks’ average lending rates by 2.7 percentage points, and
- reduced traditional banks' net interest margins by 0.9 percentage points.
- Competition led to increased operational efficiency at banks.
- Net interest margins narrowed, adversely affecting overall profitability.
Quantitative impacts (as reported)
- 3.7 percentage point: reduction in average lending rates at commercial banks per one standard deviation increase in fintech competition exposure.
- 2.7 percentage points: estimated decline in banks’ average lending rates attributable to fintech competition between 2018 and 2024.
- 0.9 percentage points: estimated reduction in traditional banks' net interest margins between 2018 and 2024.
Implications and analysis (as reported)
- Commercial banks sustained loan portfolios primarily by lowering lending rates in response to fintech competition.
- Heightened competition improved banks’ operational efficiency but compressed net interest margins, with negative consequences for overall profitability.
IMF Working Paper — “Fintech Competition and Banks’ Shrinking Margins in Brazil” by Rui Xu (Working Paper No. 2026/007, 2026).
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