In an opinion article, Leonardo Baptista, CEO and co-founder of Pay4Fun, states that Pix has become the main tool to combat the illegal betting market in Brazil. He has a degree in Computer Science from Faculdade Associadas de São Paulo (FASP) and a Bachelor’s degree in Marketing Management from Universidade Anhembi Morumbi.
The businessman has more than 20 years of experience in the gaming and information technology industry. In 2004, it set up the first bingo on the internet, an operation already permitted in Brazil at the time. In 2022, Baptista joined CIO Business Review’s list of the ten most inspiring CEOs.
Read the full article below!
Why is Pix central to combating the illegal betting market?
There is a recurring question today when we talk about the betting market in Brazil: why, even with regulation, does the illegal still continue to operate? The answer is simple and, at the same time, uncomfortable. Because we haven’t yet attacked the problem in the most efficient way.
For a long time, the fight against the illegal betting market focused on blocking websites. It is an important effort, but insufficient. The dynamics are known: one domain is blocked today, another appears tomorrow, with small variations. It’s an almost endless job, which the market itself usually defines as “moving ice”.
If we want to be truly effective, we need to change our approach. The path is different: follow the money. And it is exactly at this point that Brazil has a huge competitive advantage, Pix.
Today, only Pix is accepted as a means of payment in the country’s betting market. In other words, for the first time, we have an instrument that allows us to see and mainly interrupt the financial flow that supports these operations. When you cut pay, you cut business.
This movement has already started to happen. The Prizes and Betting Secretariat now has tougher instruments to act on institutions that operate with illegals, with fines that can reach extremely significant amounts. At the same time, the Central Bank significantly raised the level of requirements for payment institutions.
This second point is fundamental. In recent years, we have seen a proliferation of smaller institutions, often with low levels of control. With the increase in capital, compliance and money laundering prevention requirements, many of these structures ceased to operate.
In practice, this has already reduced the space for the illegal. But it’s still not enough. The irregular market still represents a relevant share: illegal betting currently accounts for between 41% and 51% of the Brazilian betting market, according to a survey by Instituto Locomotiva and LCA Consultoria Econômica.
In other words, we are talking about a huge volume of resources that fail to generate taxes, employment and consumer protection, a loss that could reach up to R$40 billion per year in revenue, according to the same sector estimate.
And here comes an important point: it makes no sense to discuss an increase in the tax burden or additional restrictions for those in the regulated market while this portion continues to operate outside the law.
If we squeeze those inside, the effect is direct: it pushes the operator and often the user out. The most efficient way to increase revenue is not to raise taxes. It’s bringing the illegal to the legal. If we do this, the regulated market practically doubles in size and, along with it, the taxes collected also double. Therefore, the focus needs to be clear: supervision.
Inspect payment methods, inspect providers, inspect whoever is operating on both sides. It is no longer possible to have companies “on the fence”, serving the regulated and illegal markets at the same time.
Another point that needs to advance is integration between regulators. The Central Bank and the Prizes and Betting Secretariat need to work increasingly closely together. The fight against illegal activities goes directly through this coordination.
Brazil built, in a short time, a solid regulatory model for betting. The market is working, generating revenue, creating jobs and offering more protection to the user. Now, we are entering a new phase: consolidation. And, at this stage, there is no doubt about where we should concentrate our efforts.
The fight against the illegal market will not happen on the surface, taking down websites. It will happen in the financial flow. Pix gives us this possibility. It is perhaps the most powerful tool we have today. The question is not whether it can help. The question is how willing we are to use it effectively.