SAO PAULO (Reuters) - Banking apps backed by SoftBank Group Corp, China’s Tencent Holdings Ltd and others are proliferating in Brazil, offering such a dizzying array of choices that skeptics say a shakeout looks increasingly inevitable.

FILE PHOTO: The logo of Nubank, a Brazilian FinTech startup, is pictured at the bank's headquarters in Sao Paulo, Brazil June 19, 2018. REUTERS/Paulo Whitaker/File Photo

Customers can shop, open no-fee checking accounts and take out loans using digital wallets from retailers like Lojas Americanas, e-commerce platform Mercadolibre Inc and even small football team Avai.

Brazil already has 50 million digital wallet accounts offered by more than 100 companies, according to some estimates.

These apps challenge the dominance of an initial wave of online banks like SoftBank-backed Banco Inter SA and Tencent-backed Nubank as they seek to grab a piece of Brazil’s 9.4 trillion real ($2.24 trillion) of banking assets.

The wave of startups are partly the fruit of central bank regulatory changes aimed at boosting competition in a banking sector in which five leaders hold 82% of total assets. The jolt of fresh competition may also help bring financial services to the nearly one-third of Brazilians with no bank accounts.

The changes threaten the hefty profits of brick and mortar banks like Itau Unibanco Holding SA and Spain’s Santander. But the plethora of new entrants could also make profits elusive for the more specialized fintechs, potentially forcing some to merge and others to give up.

On Friday yet another Brazilian retailer, Magazine Luiza, said it planned to launch an app-based wallet in January, partnering with state-run lender Banco do Brasil SA for cash withdrawals. This followed an announcement by cellular operator TIM Participacoes SA that it plans to launch a similar range of services in the first half.

“Few have a convincing reply to the question of how they’re going to make the business profitable,” said Raul Moreira, director of technology at Banco Original, one of the more established online banks, referring to the newer payment apps.

Nonbank businesses tend to offer more complex products like loans in partnership with traditional lenders.

The surge in payment accounts from nonbanks challenge online banks to learn risk management from scratch, said Luis Ruivo, head of financial services at PwC’s Brazil unit.

While retailers’ financial arms can juice up revenues, their priority is client loyalty and they are under less pressure to turn a profit than digital lenders like Nubank, Banco Original and Banco Inter, he said.

“The online banks were created to challenge the big banks but they are already being challenged by various other players,” Ruivo said.

Banco Inter is an exception among digital lenders, as it has been profitable and has a full-banking license with checking accounts, subject to capital requirement rules.

“Many newcomers are growing rapidly because consumers do not get the difference between digital wallets and checking accounts,” said Banco Inter Chief Executive Joao Vitor Menin. “Soon we’re going to see a lot of people doing silly things.”

Even small soccer team Avai, which was kicked off Brazil’s first division last month after a weak season, recently launched its own banking unit to offer financial services to its estimated 500,000 fans.