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Value Chain Report on the Financial System Infrastructure Industry in Brazil

Abstract

The Brazilian Financial System Infrastructure (FSI) has evolved into one of the most sophisticated and technology-driven ecosystems in emerging markets. Anchored by universal banks, a single integrated multi-asset exchange (B3), and cutting-edge payment rails (Pix, STR, SPI), the industry processes more than R$ 116 trillion in digital payments annually and safeguards about R$ 9 trillion in assets under custody. Yet, this impressive scale coexists with structural concentration, legacy-system constraints, and mounting cybersecurity threats. This report maps the entire value chain—from origination to technology innovation—details the roles and market sizes of key players, deciphers commercial relationships and prevailing business models, and diagnoses pressing bottlenecks. The findings reveal a dual imperative: preserve systemic stability while broadening competition and interoperability to sustain Brazil’s rapid digital-finance momentum.

Introduction

Overview of the Financial System Infrastructure

Financial System Infrastructure comprises the essential institutions, technological platforms, rules, and risk-management mechanisms that allow financial assets and funds to be created, exchanged, settled, safeguarded, and supervised. In Brazil, the FSI encompasses:

  • Capital-market infrastructure (e.g., exchanges, CCPs, central depositories)
  • Large-value and retail payment systems (STR, SPI/Pix, TED, boleto, card rails)
  • Registries for financial and credit assets (CERC, Nuclea, TAG, CRDC, SPC Grafeno)
  • Regulatory and supervisory architecture (BCB, CMN, CVM)
  • A vibrant fintech and ​infratech sector delivering cloud-native, API-based solutions.

Brazil’s public and private stakeholders have jointly promoted real-time payments (Pix), Open Finance, and instant settlement mechanisms—placing the country at the forefront of digital financial inclusion globally.

Purpose and Scope

This report consolidates industry-wide research and value-chain analysis to:

  1. Define and deconstruct each step of Brazil’s FSI value chain.
  2. Quantify activity levels, market sizes, and growth dynamics where data are available.
  3. Profile key incumbent and insurgent players.
  4. Explain the commercial flows, products, and business models linking value-chain segments.
  5. Identify structural bottlenecks and emerging challenges.
  6. Offer conclusions and directions for future inquiry.

Value Chain Definition

The Brazilian FSI value chain is network-shaped rather than linear. Nevertheless, for analytical clarity, ten interdependent stages can be distinguished. Table 1 synthesises the main components; subsequent narrative deep-dives into each.

Table 1 – Brazilian FSI Value-Chain Summary

# Value-Chain Stage Illustrative Segments Core Activities Representative Volumes (latest available)
1 Origination & Structuring Debt & equity issuance, derivatives design, securitisation Financial engineering, underwriting, distribution Incentivised debentures: R$ 111.9 bn (2024 YTD)
2 Trading & Execution Exchange (B3), OTC markets Order routing, price discovery, trade execution B3 equity ADV: R$ 23.4 bn (Nov 2024)
3 Clearing CCP functions (B3 Clearing, Nuclea) Trade matching, margining, netting Nuclea: 29 bn ops, R$ 18 tn (2023)
4 Settlement Selic, STR, SPI (Pix), B3 SSS Final transfer of cash & securities, DVP Digital-payment value: R$ 116.8 tn (2024)
5 Custody & Asset Servicing B3 CSD, Selic, custodian banks Safekeeping, corporate-action processing Assets under custody: R$ 9 tn (H1 2022)
6 Registry Nuclea, CERC, TAG, CRDC, SPC Grafeno Electronic registration of receivables & liens 100 % boleto registration by Nuclea
7 Payments Processing STR (large-value), SPI/Pix, card & boleto networks Payment initiation, routing, clearing, fraud control 138.2 bn transactions (2024)
8 Risk Management Bank risk desks, IMF risk engines Credit, market, liquidity, cyber-risk controls Function-wide; no single volume metric
9 Regulation & Supervision BCB, CVM, CMN Rule-making, licensing, oversight 1,500+ institutions supervised by BCB
10 Technology & Innovation Fintechs, cloud providers, R&D hubs Core-system modernisation, AI, DLT, Open Finance Bank IT spend: R$ 39 bn (2023); >50 m Open-Finance consents

Narrative Description of Each Step

  1. Origination & Structuring – Corporates, the National Treasury, and development banks mandate investment banks and legal advisors to craft instruments, obtain CVM clearance, and distribute offerings. Sophisticated securitisers convert receivables into CRIs/CRAs and FIDCs.
  2. Trading & Execution – B3’s integrated platform lists equities, futures, commodities, and public-sector debt (Trademate). OTC dealers handle FX, repos, and bespoke derivatives. Retail flow surged after zero-commission digital brokers entered the arena.
  3. Clearing – B3 Clearing acts as CCP for listed markets; Selic embeds mini-clearing for government bonds; Nuclea clears vast card and boleto files. Margin models (e.g., CORE) and default funds mitigate systemic risk.
  4. Settlement – STR (large-value RTGS) settles cash leg; Selic settles federal paper in real time; SPI offers 24×7 instant funds via Pix; B3’s equity and derivative settlements occur on T+2 and DVP-net modalities.
  5. Custody & Asset Servicing – Dematerialised securities remain at B3 CSD or Selic; global custodians appoint Bradesco, Itaú, Citi, or BNP Paribas as sub-custodians. Asset-servicing quality affects Brazil’s standing in global investor surveys.
  6. Registry – Since 2021, credit-risk mitigation depends on electronic registration. Nuclea dominates boleto and card receivables; CERC leads diversified receivables; TAG, CRDC, and SPC Grafeno intensify competition.
  7. Payments Processing – Pix adoption reached 39 % of all payment items; TED still commands value share (R$ 49,914 average ticket). Card acquirers (Cielo, Rede, Stone) compete on MDR and settlement speed; boleto remains crucial for e-commerce.
  8. Risk Management – Basel III, IOSCO-PFMI, and LGPD anchor risk frameworks. Banks perform daily VaR, liquidity coverage, and cyber-resilience testing; IMFs model stress scenarios and calibrate margin factors.
  9. Regulation & Supervision – The CMN sets policy; BCB licenses banks and payment institutions, supervises IMFs, and operates core RTGS; CVM oversees issuers, public offerings, and the exchange.
  10. Technology & Innovation – Open Finance APIs, DREX (digital real pilot), and sandbox initiatives fuel fintech expansion. Cloud migration (AWS, Azure, GCP, Oracle) accelerates; AI and advanced analytics enhance fraud detection.

Players Analysis

Table 2 – Key Players Across the Value Chain

Stage Domestic Heavyweights Emerging/Foreign Participants Size Indicators
Origination Itaú BBA, Bradesco BBI, BTG Pactual, BNDES Goldman Sachs, Citi, UBS BB Top 10 IBs control >75 % of primary issues
Trading & Execution B3 (sole exchange), XP Investimentos, BTG Digital Tradeweb (OTC), CME Group (connectivity) B3 market cap R$ 60 bn; 5.5 m retail investor accounts
Clearing B3 Clearing (listed), Nuclea (payments) CME Clearing (Brazil-linked derivatives) B3 collects >R$ 3 bn annual clearing revenue
Settlement Selic & STR (BCB), B3 SSS, Nuclea Euroclear Bank (link), Clearstream (link) Selic settles R$ billions of gov’t securities daily
Custody B3 CSD, Selic, Itaú, Bradesco, Banco do Brasil, Citi JP Morgan, BNP Paribas Top-4 custodians hold 68.4 % of assets
Registry Nuclea, CERC, TAG, CRDC, SPC Grafeno — CERC >10 mn receivables files/month
Payments BCB (SPI/Pix), Cielo, Rede, Stone, PagSeguro, Nubank Visa, Mastercard, PayPal, Mercado Pago Pix volume R$ 26.4 tn (2024); 138 bn digital txns
Risk Mgmt All universal banks, B3 Risk, Nuclea Risk Moody’s, S&P, Fitch, SAS, Oracle FSS Bank capital adequacy 15.9 % (June 2024)
Regulation BCB, CVM, CMN IMF, BIS (standards) 140+ normative acts issued 2024
Technology TOTVS, Matera, Dock, QI Tech, Grafeno AWS, Microsoft, Google Cloud Banking IT spend R$ 39 bn (2023)

Selected Player Profiles

• B3 (Brasil, Bolsa, Balcão) – A vertically integrated infrastructure giant providing trading, CCP, CSD, and data services. Handles ~R$ 23 bn daily equity turnover and operates the only futures market in LatAm ex-Mexico.
• Nuclea (ex-CIP) – Processes 90 % of card-transaction clearing and 100 % of boleto registration; 29 bn operations worth R$ 18 tn in 2023. Expanding into crypto-asset services.
• Selic – Real-time settlement and custody hub for federal debt; backbone of BCB’s monetary-policy operations.
• CERC – Fintech registrar specialising in electronic receivables; enables SME credit by perfecting collateral.
• Itaú Unibanco – Largest private bank; direct participant in every IMF; invests R$ 10 bn+ annually in technology.
• Nubank – Digital bank with 80 m customers; issuer/acquirer; leveraging Open Finance to cross-sell investments and loans.

Commercial Relationships

Commercial flows hinge on fee-based, transaction-based, and spread-based revenues:

  • Issuers ↔ Investment Banks – Advisory and underwriting fees (0.5–3 % for bonds; up to 6 % IPO gross spread).
  • Investors ↔ Brokers ↔ B3 – Zero/low retail commission subsidised by order-flow internalisation and exchange rebates; institutional trades charged ~2 bps.
  • Participants ↔ CCPs – Per-contract and ad-valorem clearing fees plus margin-interest spread retained by the CCP.
  • Participants ↔ Settlement Systems – Flat per-instruction charges (Selic ticket ~R$ 1.85) and account-maintenance fees.
  • Asset Owners ↔ Custodians – Annual safekeeping fees (2–8 bps of AUC) plus event-processing charges.
  • Originators ↔ Registrars – “Ad valorem” registration (2–5 bps) or flat per-document fees; high-volume discounts.
  • Merchants ↔ Acquirers ↔ Card Schemes ↔ Issuers – Merchant discount rate (MDR) 1.5–2.2 % on credit, of which ~0.6 % is interchange to issuers and 0.13 % scheme fee. Pix P2B fees negotiated bilaterally.
  • Banks/IMFs ↔ Tech Vendors – SaaS or execution-based licences; cloud costs charged on consumption; risk-analytics subscriptions.

Bottlenecks and Challenges

  1. Concentration Risk – B3’s quasi-monopoly and Nuclea’s dominance could inhibit price competition and innovation.
  2. Interoperability Gaps – Legacy ISO 8583 card files, proprietary exchange APIs, and disparate registry schemas hinder straight-through processing.
  3. Cost of Compliance – Rapidly evolving regulations (e.g., LGPD, Basel III finalisation, crypto-asset framework) strain smaller players’ resources.
  4. Cybersecurity & Fraud – 38 % rise in Pix-related fraud cases 2024; ransomware attacks target core banking hosts.
  5. Legacy Core Systems – Mid-tier banks still rely on mainframes; migration risks delay ISO 20022 and real-time capabilities.
  6. Human-Capital Shortage – Competition for AI, cloud, and cybersecurity talent inflates costs and delays projects.
  7. Data Governance – Ensuring quality, consent, and ethical use across Open Finance ecosystems remains complex.
  8. Custo Brasil – High taxes and operating costs elevate MDRs, custody fees, and brokerage spreads versus peers.

Value Chain Relationships and Business Models

Flow of Products & Services

• Primary Market – Cash (investor funds) ⇄ Securities (new issues)
• Secondary Market – Securities ⇄ Cash via exchange/OTC venues
• Post-Trade – Trade data & collateral ⇄ Clearing guarantee; Net obligations ⇄ Final DVP
• Payments – Payment instruction messages ⇄ Funds transfer; Data analytics ⇄ Fraud-monitoring services
• Information Layer – Asset data & liens ⇄ Legal certainty (registries); Market data ⇄ Subscription fees
• Technology Layer – APIs & cloud resources ⇄ Usage fees; AI models ⇄ Risk insights

Dominant Business Models by Stage

Stage Primary Revenue Logic Emerging Variations
Origination Advisory & underwriting fees Tokenised-asset issuance platforms with success-based pricing
Trading Commissions & spreads Zero-commission plus payment-for-order-flow; subscription-based premium data
Clearing & Settlement Per-transaction fees; investment income on collateral Volume-discount tiers; real-time settlement premium services
Custody Value-based safekeeping fees Fintech custody “as-a-service” for digital assets
Registry Document/volume fees mandated by regulation Data-monetisation via analytics dashboards
Payments MDR, interchange, flat RTGS fees Instant-payment overlay services, variable Pix pricing
Risk Management Internal cost centre; vendor licences Managed security services (MSSP) and risk-analytics SaaS
Technology Licence/SaaS/IaaS Revenue-sharing Banking-as-a-Service (BaaS), embedded-finance APIs
  • Concentration premiums inflate custody and trading fees.
  • Fragmented identifiers (CNPJ vs. ISIN vs. UUID) complicate asset-transfer chain, prolonging lien perfection.
  • Settlement finality windows for certain assets (e.g., corporate bonds T+2 without RTGS cash leg) expose participants to daylight credit risk.
  • Dispute resolution for chargebacks and Pix fraud burdens acquirers and banks.

Conclusion

Brazil’s Financial System Infrastructure delivers high-throughput, low-latency processing comparable to advanced economies, spearheaded by public-sector innovation (Pix, Open Finance) and private-sector scale (B3, universal banks). Transaction volumes and digitisation metrics are soaring, yet the ecosystem faces a paradox of concentration and fragmentation: market power is centralised, while data, standards, and legacy systems remain dispersed. Priorities for stakeholders include:

  1. Stimulating competition in exchange, clearing, custody, and registry layers through pro-entry regulation and open-access mandates.
  2. Advancing full ISO 20022 adoption and interoperable APIs across all IMFs.
  3. Fortifying cyber-resilience via sector-wide threat-information sharing and mandated penetration testing.
  4. Streamlining regulatory roadmaps to balance innovation velocity with consumer protection.
  5. Addressing skills shortages through fintech-academia partnerships and targeted upskilling incentives.

Further research should quantify cost-to-serve different client segments, evaluate the economic impact of DREX pilots, and benchmark Brazil’s FSI efficiency against peer jurisdictions.

References

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