Central Bank of Brazil Raises Concerns Over Soaring Pix-Based Betting and Impacts on Low-Income Families

Online gambling activity in Brazil has seen a significant uptick in recent months, with the Central Bank reporting a notable increase in the use of Pix, Brazil's instant payment system, for gambling transactions. According to Central Bank President Roberto Campos Neto, transfers to online betting platforms have surged by over 200% since January. He also raised alarms about the correlation between betting activity and low-income individuals, particularly those receiving financial aid from the government's Bolsa Família program.

At a conference organized by Banco Safra in São Paulo, Campos Neto highlighted the massive growth in online betting facilitated by Pix, a system that enables near-instant money transfers. "We can map what Pix has done for these platforms and the growth since January has been quite large," he stated. This sharp rise has prompted the Central Bank to warn of potential repercussions for the country’s economy and financial stability, especially given the growing prevalence of gambling among financially vulnerable individuals.

Warnings on Credit and Fiscal Impacts

During the conference, Campos Neto expressed concerns about how this surge in online betting could affect the country's credit quality, noting that the increase in gambling among low-income citizens could lead to greater financial strain and default. "There is a perception that we may have a worsening in the quality of credit with a major impairment,” he said. This comes as the Central Bank continues to monitor the economic impacts of Pix-related betting, gathering data to better understand the extent of the issue.

The connection between online betting and individuals receiving Bolsa Família has been particularly troubling. The program provides financial support to low-income families, and according to Campos Neto, many of its recipients have been engaging in gambling activities. "The correlation between people who receive Bolsa Família, low-income people, and the increase in bets has been quite large,” he stated, raising concerns that vulnerable groups are being disproportionately affected by the rise in online betting.

On Tuesday, the Central Bank released a Technical Analysis detailing the growth of Brazil’s online betting market. The report, which was requested by Senator Omar Aziz, aims to assess the scope and impact of the market, including the financial behavior of bettors. According to the analysis, a substantial number of gambling companies in Brazil operate under misleading names or are incorrectly classified in the country’s economic sector registry, making it difficult to fully gauge the size of the industry.

The Central Bank's study found that in August 2024, there were 520 companies classified under the gambling sector, registering an average monthly transfer of R$300 million (US$ 54.5 million). However, the report also revealed that many companies receiving gambling-related transfers are not officially registered under the correct classification, complicating efforts to monitor the sector.

In August, the total amount transferred to gambling companies in Brazil was estimated at R$20.8 billion (US$ 3.8 billion). According to the Central Bank’s findings, approximately 15% of these bets are retained by companies, with the rest distributed as winnings. The study further identified around 24 million individuals participating in online gambling, with most being between the ages of 20 and 30.

Betting Among Welfare Recipients

One of the most alarming findings from the Central Bank's report is the significant amount of gambling activity among individuals receiving financial aid. In August 2024, an estimated 5 million people from Bolsa Família households sent around R$3 billion (US$ 545 million) to betting companies using Pix, with an average monthly expenditure of R$100 (US$ 18.2) per person. This included 4 million heads of families, who are the primary recipients of Bolsa Família benefits. The findings suggest that approximately 17% of those enrolled in the program engaged in gambling during the period.

"The results are in line with other surveys that point to low-income families as the most affected by sports betting activity,” the report states. It also suggests that the allure of potentially winning large sums through betting is particularly strong among those in financial difficulty, increasing their vulnerability to gambling-related harm.

To address the growing concerns around the online gambling market, Brazil’s government has been preparing to implement stricter regulations. Starting from 1 October, operators who have not applied for a gambling license will face suspension, while unlicensed operators will be subject to sanctions beginning on 1 January 2025. Additionally, the government has already enacted measures to limit the payment options available to gamblers, including a ban on credit cards, cryptocurrencies, and checks for betting purposes.

The use of Pix for unlicensed operators will also be blocked under the new regulations, which aim to crack down on illegal gambling activities. As Hugo Baungartner, CCO for local operator Aposta Gahna, explained in an earlier interview with iGB, Pix is used by 99% of Brazil’s online betting market. The government hopes to leverage this payment method to prevent unlicensed operators from processing payments and to enforce compliance ahead of the regulated market’s launch next year.

The Central Bank continues to study the full impact of online gambling on Brazil’s economy, with particular attention to how gambling affects low-income citizens. As Campos Neto indicated, more data is needed to evaluate the long-term consequences and formulate appropriate policy responses to protect vulnerable groups while ensuring the sector remains under control.

Source:

''Brazil Central Bank: Pix for ‘Bets’ increased 200%, gambling grow among Bolsa Família beneficiaries'', gamesbras.com, September 25, 2024.

''Pix gambling transfers in Brazil up 200% since January'', igamingbusiness.com, September 25, 2024.

''Valores de Pix para apostas cresceram mais de 200%, afirma Campos Neto'', correiobraziliense.com.br, September 24, 2024.