Business
StoneCo Releases Teach-In Paper About the New Dynamics of Registration of Receivables in Brazil
SÃO PAULO, Brazil, Aug. 25, 2021 (GLOBE NEWSWIRE) -- StoneCo Ltd. (Nasdaq: STNE) (“Stone”) today released a teach-in to explain the dynamics of the new
About this update from Stoneco Ltd.
[{"type":"text","content":"SÃO PAULO, Brazil, Aug. 25, 2021 (GLOBE NEWSWIRE) -- StoneCo Ltd. (Nasdaq: STNE) (“Stone”) today released a teach-in to explain the dynamics of the new registration of receivables in Brazil and its implications to the payments industry and Stone's business. We have received many questions around the implementation of the new registry of receivables in Brazil and we think it is important to provide our views given how complex and technical the matter is. We believe that over the medium and long term, the subject should have a very positive impact for both the Brazilian society and our business. Overview We discuss four main topics here: (1) the dynamics of card receivables being used as collateral in Brazil; (2) the new framework set in place on June 7, 2021; (3) the operational challenges of the new framework; and (4) the implications for Stone’s credit business. 1. Dynamics of Card Receivables Used as Collateral in Brazil The Brazilian market is going through a significant transition adjusting to the new dynamics of registration of card receivables. Prior to June 7, 2021, the market operated under Resolution No. 4,707 of the National Monetary Council and Rule No. 3,924 from the Central Bank (the “Transitory Rules”).On June 7, 2021, the market switched to the current regulatory framework under Resolution No. 4,734 of the National Monetary Council and Circular No. 3,952 of the Central Bank (the “New Regulatory Framework”). In order to understand the situation, we believe it is useful to recap what were the rules before June 7, and what motivated the regulatory changes between the Transitory Rules and New Regulatory Framework. Under the prior Transitory Rules, a merchant could use its current and future receivables (cash flows generated from its credit card transactions) of a specific card network, such as Visa or Mastercard, as collateral for loans from a financial institution. It worked as follows: Creating collaterals and “the lock” of receivables. When entering into a loan agreement with a merchant, a financial institution sets performed and future receivables as collateral for the loan and determines the appropriate bank account in which the cash flows from those assets should be settled by the merchant's card acquirer. This was called “the lock” of receivables, because it was locking those cash flows to a specific bank accou...