Pagbank breaks through the rank of top neobanks in Brazil

The Brazilian digital banking sector, once bustling with activity, has now evolved into a diverse landscape. Notable players include the $30 billion Nubank, aggressively expanding across Latin America, PicPay, a digital wallet service amassing millions of users in Brazil, and Mercado Pago, the fintech branch of Argentine e-commerce giant Mercado Libre, making significant inroads in the region. Traditional banks have also joined the digital banking wave with offerings like Iti from Itaú and Next from Bradesco.

In this evolving scenario, the acquisition sector has been making notable strides. PagBank, the digital banking arm of payments processor PagSeguro, has steadily gained ground. In the last quarter, it reported a customer base of nearly 30 million in Brazil, positioning itself among the top five neobanks in Latin America based on customer numbers.

The Brazilian digital banking sector has experienced impressive growth recently, driven by initiatives like Pix’s instant payments and the digitisation of the population during the pandemic. Many neobanks have successfully onboarded customers, resulting in intense competition for market share. As the landscape becomes increasingly crowded, every neobank aims to secure its place as customers’ preferred choice.

Despite the competitive environment, PagBank reported almost 30 million customers in the most recent quarter, a 19% increase from the previous year. This growth demonstrates that the neobank is thriving even in a more competitive digital banking landscape. While it ranks fourth in Latin America, behind Nubank, PicPay, and Mercado Pago, PagBank’s CEO, Alexandre Magnani, emphasised a shift in focus. He stated that the neobank would prioritise activation and profitability rather than just acquiring more customers to stimulate revenue growth.

This shift highlights a significant change in the Brazilian neobanking landscape. As the market shows signs of reaching saturation, challenger banks that initially concentrated on expanding their customer base are now compelled to prioritise profitability. Notably, many Brazilians maintain accounts with multiple digital banks, making customer acquisition alone insufficient to drive top-line growth.

PagSeguro, a Brazilian sub-acquirer with a digital banking unit called PagBank, has merged its services to create a more attractive value proposition for Brazilian SMEs and individuals. While PagBank has attracted new customers, it faces fierce competition for “principality” and saw its stock experience a sharp decline after reaching record highs in 2021.

According to fintech specialist Bruno Diniz, PagBank has encountered difficulties in differentiating itself among individual users, especially from more established players. In terms of its loan portfolio, PagBank, like many other digital banks, has yet to gain significant traction. As the Brazilian neobank sector matures, it is experiencing signs of consolidation and market saturation, with the focus shifting towards gaining and maintaining market share.