Brazil's Embedded Finance Industry Poised for Massive Growth | ETF Trends

Brazil’s embedded finance industry is expected to grow by 45.3% on an annual basis to reach $3.74 billion in 2022, according to a new report from Per the report, the embedded finance industry is expected to grow at a compound annual growth rate of 27% from 2022 to 2029. The embedded finance revenues in the country will increase from $3.74 billion in 2022 to $13.75 billion by 2029.

The substantial growth the embedded insurance space has experienced in Brazil can be primarily attributed to the growing number of insurtech firms emerging in the country. The number of insurtech firms has reached more than 200 in 2020, from less than 100 in 2017. The rising popularity of embedded insurance policies is pushing Brazilian start-ups to leverage this rapid growth by raising funds. Capital infusion in the embedded insurance sector is projected to support the country’s overall insurance penetration rate.

The growing e-commerce industry is also offering a significant growth opportunity for the embedded insurance industry within the country. In August 2020, online marketplace company MercadoLibre Inc. (MELI) launched a product to insure cell phones in Brazil. The insurance policy allows users to insure their smartphone screens or buy a complete robbery or theft coverage.

While the embedded payment market in Brazil is still in the nascent growth stage, the country’s huge population offers massive potential for the growth of the embedded payments market. Additionally, growing investments in the market are expected to result in the evolution of the embedded payments market in the next four to eight quarters.

The report also notes that market players are increasingly combining their expertise and developing new embedded payments solutions to capture the massive untapped population in Brazil. In November 2020, Brazil-based fintech company EBANX and ride-hailing app Uber announced a partnership on PIX, a payment system launched by the Brazilian government.

Under this partnership, EBANX will address Uber clients’ needs of payments, localization, and good user experience through their solutions. Since a large population of Brazil does not have a bank account, Uber’s clients are anticipated to benefit from the newly introduced instant payment platforms, and EBANX is expected to use Uber’s existing client base.

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