PayTech, lending in Brazil, and what the U.S. Small Business Administration has announced

Welcome to the latest edition of The Risk Radar! This week, we’re examining the forces driving and potentially slowing down economic growth, from Brazil’s lending boom to the rise of PayTech. We’ll also take a closer look at how the SBA’s expanded lending network is shaping opportunities for small businesses across the U.S. Stay tuned as we break down these key developments and what they mean for businesses navigating the ever-evolving finance space.

What is PayTech? Digital payments and what they mean for the future of FinTech

PayTech, short for payment technology, refers to the tools and systems that make digital payments faster, easier, and more secure. This includes mobile payments, digital wallets, cryptocurrencies, buy now, pay later (BNPL) services, and technologies like biometric authentication. The digital payment industry is booming, with the global market expected to reach $361.3 billion by 2030, and 74% of consumer payments predicted to be processed through non-traditional providers by that year.

Key PayTech solutions are already revolutionizing payments, such as mobile wallets like Apple Pay (accepted by over 85% of U.S. retailers) and QR code payments, which could grow to 2.2 billion users by 2025. As consumers demand faster, more secure options, AI and machine learning are being used to improve fraud detection, risk assessment, and personalized payment experiences. By 2029, contactless payment transaction values are expected to nearly double, reaching $15.7 trillion, indicating that PayTech will continue to reshape the way we pay and manage money.

Brazil’s Credit Surge Fuels Growth, But Economic Slowdown Looms in 2025

Brazil's credit market has played a key role in driving economic growth in 2024, with the country’s credit impulse—measured by new loans minus repayments—currently at around 4% of GDP. However, economists warn that this boost is unlikely to continue into 2025 due to rising interest rates and the weakening of the Brazilian real, which could slow lending. Santander's study found that non-earmarked credit, including personal and business loans, has been a significant driver of this surge, though it remains risky, particularly for individuals with high levels of debt.

While delinquency rates have improved, they still hover around 5.5% for non-earmarked household credit. Economists, including Bruno Martins from BTG Pactual, predict that tightening financial conditions and inflationary pressures will likely lead to a credit slowdown in 2025, potentially impacting consumer spending and business investment. A rise in interest rates and a squeeze on disposable incomes could further dampen economic activity, making credit expansion unsustainable in the long term.

SBA expands lending network to support underserved small businesses

On December 23, 2024, the U.S. Small Business Administration (SBA) announced the addition of four new Small Business Lending Companies (SBLCs) to its network, aimed at improving access to capital for underserved small businesses. The new licensees—Cooperative Business Services, A10 Capital, Lafayette Square, and Stonehenge Capital—will focus on lending to low-income and rural communities, women, veterans, and minority-owned businesses. This expansion, the second of its kind in 40 years, increases the number of SBLCs from 14 to 20.

These organizations will utilize the SBA's 7(a) loan guarantee program to reduce risks and make more loans possible. For example, Cooperative Business Services has already provided over $400 million to women-owned businesses, and Stonehenge Capital has invested over $1.5 billion in underserved markets. These efforts align with the Biden administration's goal to support entrepreneurs in areas that are often overlooked by traditional lenders.