Fintech Rising

The financial world is changing. Rapidly.

As Forbes mentioned in a recent article, the digital influence is changing all aspects of how people and businesses deal with money. Start-ups offering tech-enabled payments, currency exchange, crowd funding, online lending and wealth management services are sprouting all over the globe, posing a fierce competition to traditional retail banking and financial services firms.

“The financial crisis meant that a few financial services giants stopped investing in R&D. This, coupled with new regulatory requirements imposed on the banks and the need to drive costs out of financial services, meant that opportunity was ripe …” explains Eric Van der Kleij, British entrepreneur ahead of Level39, in interview to Fortune.

The drive of these young companies is to innovate and therefore represent a break with traditional financial institutions, known for their dated technology made for an era that has passed. FinTechs disseminate a range of financial services that, until recently, was exclusive to banks, with one crucial difference: companies can now see and measure the service they are hiring. Scanning has brought more transparency to the sector, as well as new and reliable metrics to measure performance and assist the making of strategic business decisions. It’s technology in favour of financial results. This is particularly true for countries under development, where banking and financial systems are heavily bureaucratic.

Brazil, for example, has only a fraction of the thousands of FinTechs existing in USA. Nevertheless, FinTechs are finding fertile ground to grow and Brazilian banks have shown concern about the phenomenon.

Itaú, the largest and most profitable bank in the country, bought an ecommerce gateway in 2014, MaxiPago, for an undisclosed amount. They have also partnered up with other investors and business accelerators to bring under their wings a co-working space, home for 42 start-ups, of which, 6 are FinTechs.

Bradesco have been sending staff to New York, Silicon Valley and London for the past three years with the single purpose to research digital news. They are also hosts of a business incubator program called InovaBRA, created with the mission to accelerate start-ups whose business has affinity with the bank.

The underlying reason of all this rush of banks is the recognition that large institutions are often unable to innovate at the speed required. While banks struggle to think of new ways to relate to their digital audience, start-ups are born with a product tailored to the user. The general consensus among financial institutions is that the partnership, in the end, may be the best way.

Brazilian Fintechs

Brazil has a lively ecosystem for Fintech start-ups. The one everyone is setting their eyes on is Nubank. The company issues credit cards free of annuity in contraposition to regular banks, whose annuities are fiercely criticised and often considered abusive. Nubank is backed by the giant Sequoia Capital and have already 300,000 people lining up to receive their cards despite never spending a single penny on advertisement. Another significant difference of the company with traditional card issuers is the fact that contact with the company is done almost entirely through digital format, with 65% of customers using their built-in chat application, and to minor degree, through social medias and email.

Another equally rising star is Magnetis, an intelligent platform that helps people design a tailored investment plan for themselves. The platform is free of charge (until you actually decide to invest and the company takes a modest 0.4% of the total invested per year) and accessible to all people, regardless of the size of their assets. They were pioneers of this technology in Brazil, starting in 2010 and now managing accounts of over 115 000 customers, worth a total of 2,8 billion dollars.

In the same segment, there is GuiaBolso (literally translated ‘Pocket Guide’), a Personal Financial Management platform that automates budgeting and guides financial decision-making. They are the most downloaded app in Apple Store Brazil with 1,6 million active users registered.

The land is ripe

Brazil has the fastest growing ecommerce in Latin America and contain highly desired markets for foreign firms. The favourable scenario attracted many investors looking to seed and grow capital with Brazilian start-ups. Mirroring what resembles the conquest of the west in early centuries in USA, foreign Fintechs have also entered the arena to secure ground in Brazil.

The dutch-based Adyen announced recently they achieved an incredible milestone as “the volume of its payment transactions in Brazil grew 160% in 2014, representing more than 300% revenue growth.” The company started its activities in the country in 2010 by consolidating strategic partnerships, but soon moved on to establishing a local office. “There are endless possibilities for growth in Brazil, because in many cases businesses in the market still rely on manual routines for payment processing, risk management and financial reconciliation of payments,” says Jean Christian Mies, Senior Vice President LatAm.

The opportunity is there for anyone to take.

There is a lot more that could be said about. On February 5th, there will be a live event hosted by the Danish/Brazilian firm Biassa where this subject will be discussed even further. The guest speaker is Davi Strazza, head of sales for Adyen in Brazil and LatAm. The event is is free of charge and open to anyone interested. It is a great opportunity to hear more about Adyen’s position in Brazil and get a panoramic overview of the actual scenario, as well as growth opportunities for fintechs and start-ups in general.

You can sign up for the event here:

Carlos Monteiro is a Brazilian citizen, graduated in Business Administration by the Catholic University of São Paulo. He lives in Odense, Denmark with his Danish Wife, Cathrine, and their half Danish /Brazilian daughter Ines Marie. You are very welcome to be in contact him at any time.
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