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Febraban Warns of Possible Increase in Default Until Regulation of Online Betting.
The President of the Brazilian Federation of Banks (Febraban), Isaac Sidney, made an important appeal to the government, asking for an early ban on the use of credit cards in betting. The reason? The fear of a significant increase in defaults in the coming months, before the regulation set to take effect in January next year comes into force.
Currently, the use of credit cards in betting remains allowed, which worries the banking sector. Data from the Central Bank already shows that the default rate among individuals with credit cards reached 7.39% in July, a high number compared to the average of 7.71% recorded in the last 12 months. This could worsen, especially with the increasing availability of betting platforms and the rise in advertising campaigns around betting.
Worried Banks
Last Thursday (12), Isaac Sidney, President of the Brazilian Federation of Banks, expressed his concerns to journalists, highlighting that the unrestricted use of credit cards in betting until the start of regulation could seriously compromise family income. “We are very concerned about how much this could affect family income and increase defaults, which could also raise the cost of credit,” said the President of Febraban.
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Sidney has already raised the issue directly with President Luiz Inácio Lula da Silva and Finance Minister Fernando Haddad, but so far, there has been no concrete response regarding the advance of the measure. The regulation, which is expected to come into force in January 2025, was announced by the Ministry of Finance in April of this year, and it prohibits payments with credit cards in betting and other forms of fixed-rate betting, such as sports betting and online games.
Beyond Credit Cards in Betting…
In addition to credit cards in betting, the regulation also aims to prohibit cash payments, boletos, checks, cryptocurrencies, and any other form of payment that makes it difficult to identify the source of the money. However, more traceable forms of payment, such as Pix, debit cards, TED transfers, and prepaid cards, will continue to be allowed for this type of operation.
Sidney’s concern, as President of the Brazilian Federation of Banks, is that the rising default rate could harm the banking sector and, of course, the economy of Brazilian families, who are already struggling to cope with credit. A recent study by Itaú showed that annual spending on games and online betting in Brazil reached an impressive R$ 23.9 billion, with a significant part of this value related to betting and other types of gambling.
The Financial Impact of Betting in Brazil and the Position of the Brazilian Federation of Banks
According to the Itaú research, online betting already represents 0.2% of Brazil’s GDP. To give you an idea, Brazilians wagered about R$ 68.2 billion in 2023 but managed to withdraw only R$ 44.3 billion, with the remainder staying in the hands of betting platforms. This means that for every R$ 3 wagered, Brazilians lose R$ 1, placing many families in delicate financial situations.
The alert from the Brazilian Federation of Banks is clear: if regulation is not advanced, the default scenario may worsen by early 2024, affecting both consumers and the banking sector. The expectation is that the government will evaluate the proposal and possibly take measures to help protect the economy of Brazilian families before the situation worsens further.
With the growing popularity of betting and the ease of access to these sites through credit cards, Febraban’s request can be seen as an essential move to mitigate the economic and financial damages caused by online betting in Brazil.
With the growing popularity of betting and the ease of access to these sites through credit cards, Febraban’s request can be seen as an essential move to mitigate the economic and financial damages caused by online betting in Brazil. But will the government act in time to prevent an even greater increase in defaults?
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