Innovation at the customer’s service
With agile and customized solutions, fintechs advance in Brazilian market. The financial startups have the potential to impact various segments of the economy, independently or alongside traditional banks.January-March | 2018
The progress of digital transformation in recent years has allowed fintechs to go beyond providing niche services to become relevant competitors, past the financial market. As an example, the Brazilian Fintech Association (ABFintech) was founded two years ago, with 50 companies. At the end of 2017, the number of members reached 320. This 640% of growth is one of the indicators of the national dynamism when it comes to fintechs.
A recent study published by Deloitte, “Beyond Fintech: A pragmatic assessment of disruptive potential in financial services”, traces a panorama of fintechs’ perspectives and relationships with the classical structures of the financial sector. The survey shows that the global investment in startups increased in 2017 and that the areas of operation of these new companies have mushroomed. While they used to focus in banking services intermediated by digital technologies, fintechs work now with insurance, financing and real estate development operations. The report also shows the growing possibilities of synergy between the already established institutions and new competitors, in a scenario subjected to quick developments.
Fintechs have brought a new dynamics to the financial industry, based on business innovation and digital transformation., Sergio Biagini, Deloitte's partner in the Consulting area and expert in the Financial Services industry.
“The financial startups have a different customer culture; they are lighter, more agile and strongly focused in delivering value to the business and to the final client. They are still thriving and taking advantage of market niches, or of gaps in the clients’ journey, where the experience is unsatisfying”, explains Biagini. There is no shortage of examples.
Created in 2014, the GuiaBolso provides financial control tools and a pioneer fully online credit platform, accessible via mobile device applications. In three years, the company obtained three million users by betting on a transparent relationship and on clear features available to customers. “The consumer pays high interest rates and generally do not receive services with an equivalent quality. The fintechs detect market difficulties and bring more efficiency to certain segments,” says Thiago Alvarez, CEO of GuiaBolso.
Vérios has a similar trajectory. Presented by its CEO, Felipe Sotto-Maior, as “a truly independent investment manager”, the company operates as an intermediary between individuals and investment broker companies, with rates lower than those charged by the traditional companies. “We control all customers’ investments in order to minimize risks and rid the people of the work associated with investment management. The customer’s sole task is to save money and put it in the account, we everything else”, says Sotto-Maior. With this, in little more than a year and a half of operation, Vérios jumped from a portfolio of R$ 16 million to a total of R$ 170 million in managed investments at the end of 2017.
Sergio Biagini examines the market development in recent years: “Around three years ago, there was an expectation that certain services would be dominated by the fintechs but, in reality, we are moving towards a collaborative scenario. A great part of the financial institutions has faced the potential threat of these startups as an opportunity for transformation. These companies have brought the fintechs closer in order to work together in innovating their business models and change their cultures.”
Institutions such as Banco do Brasil are attentive to this new reality. The state bank accelerated its approach with startups in the past year, which included a formal partnership with ContaAzul, an online platform for tax and financial management. In 2018, the strategy goes through the Open Banking, a program focused on creating new business models and services by joining the bank to external companies, with emphasis on digital resources for BB customers. “There is a need to offer the client an integrated digital experience to other moments of their life, in a safe manner. We have held regular meetings with startups and several directors of the bank, looking for possible partnerships”, says Marco Mastroeni, Digital Business Director of BB.
Through the Innoventures fund, headquartered in the United Kingdom, Santander is one of the banks that invest the most in fintechs, globally. “There are projects concerning asset management, loans, payments, regulatory technology, software and blockchain”, explains Alexandre Zancani, director of Santander’s multichannel platform in Brazil.
According to the executive, the strategy is to generate business to the startups in a collaborative way, including initiatives of open innovation – which incorporate to Santander’s processes some novelties thought outside the bank, through the digital business board. “We have participated in fairs and other events with the startups, analyzed their business and verified in what area of the bank they could relate to. Moreover, we have weekly meetings to work on projects with these companies,” says Zancani.
“Fintechs shall be seen as modern tools, which may or may not replace traditional players. But, in most cases, they should coexist in the same ecosystem” says Gustavo Muller, CEO of Monkey Exchange. His startup offers capitalization alternatives for other companies through receivables discounts, together with a wide range of investors. With a smaller structure, based on digital services, Monkey can offer more competitive prices to their customers. Muller believes that the fintechs’ impact is not confined to the banking sector: “We live in a new industrial revolution, whose main elements are the technological innovations that contribute to a broad cycle of sustainable and positive growth.”
Advancements in new markets go through regulatory issues
In the opinion of Rodrigo Mendes, Deloitte’s partner in the Risk Advisory area who operates under the Strategic and Reputation Risks pillar, the potential impact of the fintechs is already felt in various segments, beyond the financial market. “There are insurers that work with a client-centered approach their clients, typical of financial startups, with additional services besides the insurance policy in digital channels. Banks have also invested in e-commerce services, such as Shopfácil and WebMotors, to provide more services to the clients”, points out Mendes.
According to the Deloitte’s partner, the Brazilian customer is naturally predisposed to test different solutions, but, in the case of a market with regulations as complex as the national financial system, the introduction of new products is not so simple. “The regulatory agencies may act as drivers for innovation, as we observe with the introduction of news regulations that incentive the Openbank in Europe and with the demonetization promoted by the authorities in India. On the other hand, the United States have yet to adopt a system to liquidate on-line resources transfers”, says Mendes. The Central Bank of Brazil recently published a regulation on payment arrangements that are circulating outside the banking network (prepaid cards, food and meal tickets, etc.). “The number of digital financial services available in Brazil is a world reference and the BC is concerned about encouraging innovations, while preserving the system stability. Among other examples, we may point out the last regulation changes concerning the opening of digital accounts, which no longer require the customer’s physical presence at a bank agency”, says Mendes.