The Borrower Who Is Also the SecurityNarrow moat
StoneCo (STNE) — moat facet
The collateral and the customer are the same thing, which is a far better position than a bank waiting for a transfer and a far worse one if the merchant keeps a second terminal.
StoneCo's credit portfolio reached R$2,836 million at the end of 2025, from R$1,207.6 million a year earlier, with expected credit losses of R$389.7 million against R$144.5 million1. The borrowers are the same merchants who take the terminals, and the loans are secured against the receivables those terminals generate.
That produces a customer relationship with an unusual property: the collateral and the customer are the same thing. StoneCo is not lending against an asset the borrower owns and could sell. It is lending against money the borrower has not yet been paid, which StoneCo will itself be collecting, and which exists only for as long as the merchant keeps processing through StoneCo.
The strength of that is obvious. Repayment can be taken out of the flow before the merchant sees it, which is a far better position than a bank waiting for a transfer. The weakness is that it makes the credit business dependent on retaining a payments customer in a market where merchants keep several terminals, and where an increasing share of sales settles over Pix and never becomes a card receivable at all.
The company's answer is to concentrate lending on merchants it also banks, which is the right answer: a deposit relationship is harder to dilute than a terminal.
The number that tests this whole customer relationship is the cost of risk through a full cycle rather than through an expansion. A book that more than doubled in twelve months is mostly composed of loans too young to have failed, and the 2021 episode is the reason that sentence deserves attention rather than reassurance.
The credit portfolio more than doubled to R$2,836 million in twelve months while the provision nearly tripled to R$389.7 million, and the collateral behind it exists only while the merchant keeps processing through StoneCo — in a market where merchants multi-home and an increasing share of sales settles over Pix as no receivable at all.
From R$1,207.6m and R$144.5m twelve months earlier — the book more than doubled and the provision nearly tripled. The collateral is the merchant's own future card receivables, which exist only while the merchant keeps processing through StoneCo. The test is cost of risk through a full cycle, not through an expansion.
Source: StoneCo FY2025 Form 20-F ↗- ReportedThe credit portfolio stood at R$2,836 million with R$389.7 million of expected credit losses at end-2025, against R$1,207.6 million and R$144.5 million a year earlier.StoneCo Ltd. Form 20-F for FY2025 (CIK 1745431) — active payment clients of 4,803.5 thousand at 31 December 2025, against 4,172.7 thousand in 2024 and 3,522.1 thousand in 2023; TPV of R$560.9 billion, against R$516.2 billion and R$438.3 billion; revenue of R$14,153.8 million and adjusted net income from continuing operations of R$2,477.2 million; more than 3.6 million banking active clients, the majority of whom are also payment clients; retail deposits of R$11,091.0 million against R$8,704.8 million and R$6,119.5 million; a credit portfolio of R$2,836 million with expected credit losses of R$389.7 million, against R$1,207.6 million and R$144.5 million a year earlier; clients divided into MSMBs (micro-merchants and SMBs) and Key Accounts, 'comprised of platform services and sub-acquirers'; StoneCo became in 2017 the first non-banking entity authorised by the Central Bank to operate as an Acquirer through a payments-institution licence, and is among the six largest players by total card volume per ABECS; distribution through proprietary and franchised hubs sold on 'service differentiation as the main driver', digital channels, and more than 500 Strategic Partners at December 2025; per the Central Bank, Pix's share of the total number of transactions rose from 1% in Q4 2020 to 52% in H1 2025 and its share of monetary volume from 1% to more than 26%; the filing warns that 'the concentration of our clients by geography and economic sector may increase our risk' and that the company experiences churn from business closures and account transfers; interest rates directly affect both revenue generation and cost of funds, most third-party funding being linked to the Brazilian interbank rate; StoneCo's own analysis notes that US MSMB take rates have been stable over five years despite penetration around 120% of consumption, and finds no indication of saturation-driven price reductions in Brazilian cities with low cash usage — FY2025 · publ. 2026 · source ↗