High Delinquencies Spell Trouble for Brazil’s Fintechs (1)

Brazilian fintechs are getting hit by a wave of defaults on loans they made to customers that the nation’s bigger, legacy banks wouldn’t touch, causing risky layers of an asset-backed credit market to collapse.

The companies, which include Goldman Sachs-backed Open Co and Nexoos, are seeing delinquencies on some of their portfolios for unsecured loans rise to as much as 60%, forcing them to merge, pull back on expansion plans and sell assets to survive.

It’s reverberating through vehicles called FIDCs, which Brazilian firms use to raise cheaper financing. Delinquency rates in the 65.5 billion reais ($13.2 billion) fintech FIDC ...