As of April 2023, there were 1,000 active fintechs in Latin America (LatAm) with a vast majority focusing on financial inclusion, tackling the issue of 70 per cent of the population not having access to formal financial services. Em Conversa looks to uncover what the future of fintech could look like in the region, following a $2.1billion valuation in 2022.
Two years ago, we started our Em Conversa series to uncover some reasons for the boom in LatAm fintech. Since then we have heard from companies all across the region in different countries, as well as those from other parts of the world looking to expand into LatAm. Since 2022, a lot has changed so we decided to revisit some of our earliest features to see to what extent the market has stayed the same and how much it has evolved.
Having previously spoken to Rodrigo Tumaián, co-CEO and co-founder of Prometeo, the open banking platform, about open banking’s development, this time we spoke to the firm’s, co-CEO and co-founder, Ximena Aleman, to learn about the sector’s evolution.
Can you tell me a bit about your role within the company?
Ximena Aleman, co-CEO and co-founder, Prometeo
As the co-CEO and co-founder of Prometeo, my main objective is to promote the adoption of APIs throughout Latin America, serving as a single access point to interoperate in the entire region.
My role involves managing and cultivating relationships with our financial partners and our investors. Especially during key growth moments like funding rounds.
Alongside the talented team at Prometeo, we develop and execute strategies that will enhance financial inclusivity and streamline access to financial data and transactions. Our goal is to build an open and interconnected financial market. We want to make Prometeo the go-to platform for both large corporations and rapidly growing startups.
How has open banking impacted the credit market in the past two years?
Open banking has made a significant impact on the credit market by promoting financial inclusion and improving risk management for lenders. One valuable feature it provides is the ability to access customers’ financial information (with their authorisation), enabling the lender not only to approve credit but also to offer personalised rates or payment plans tailored to the customer’s financial situation.
With Prometeo’s account-to-account payment solutions, lenders may transfer money to their clients in real-time, straight to their bank account. This not only increases the speed but the reliability of transactions. Clients may also pay their instalments directly from their bank account to the lenders.
Additionally, identifying potentially fraudulent bank accounts allows businesses to be aware of and act on risks and enhances the accuracy and safety of credit assessments. For lenders, this means they can better assess and manage their loan portfolios more effectively, resulting in improved credit risk management practices, potentially reducing default rates, and enhancing overall financial stability in the market.
Fundamentally, open banking increases financial inclusivity, making services more accessible to underbanked populations. By leveraging a wealth of data, financial institutions have improved their credit assessments and are now able to offer more personalised products. For example, more accurate risk assessments contribute to competitive interest rates and loan terms for borrowers with favourable credit histories.
Overall, I would say open banking is creating a more dynamic and fair financial landscape in Latin America.
Have there been any new region-exclusive open banking developments?
Yes, there have been several region-specific developments in open banking across Latin America.
Countries like Brazil, Chile, and Mexico have implemented regulatory frameworks that encourage the adoption of open banking. These initiatives have led to the creation of new financial products and services tailored to the unique needs of consumers. For example, in Brazil payments platform PIX was initiated by the Central Bank of Brazil four years ago. It is rapidly emerging as the preferred method for making payments in the country.
For example, Colombia has unveiled its roadmap for implementing open banking in the coming years. Prometeo’s single API approach has been instrumental in these developments, offering differentiated connectivity across hundreds of financial institutions.
How are users in the region starting to see the benefits of the technology?
In Latin America, users are starting to witness the transformative advantages of open banking but above all, it empowers them with greater control over both their finances and financial data.
The user experience has greatly improved, with digital platforms making it simple and efficient to manage finances. Now, users can effortlessly secure loans, open savings accounts, and acquire insurance products. They can also execute real-time, direct payments from their bank accounts and conveniently add funds to digital wallets in contrast to the frequent time delays experienced with legacy technology.
The user experience has been significantly enhanced, thanks to digital platforms that streamline and simplify financial management processes. The ability to make real-time payments directly from bank accounts has added a level of convenience and speed to everyday transactions that users really appreciate.
For businesses, the advantages are just as noteworthy.
Reduced transaction costs mean businesses can save money and reinvest those savings back into their operations. Faster payment processing enhances cash flow management, ensuring that funds are available exactly when needed.
Additionally, the advanced fraud prevention measures provided by open banking solutions offer a level of security and trust that businesses can depend on, creating a safer financial environment overall. These improvements are contributing to a more dynamic and inclusive financial ecosystem across the region, and Prometeo is proud to be at the forefront of this transformation, driving innovation and financial inclusion.
How has Prometeo evolved in the last two years?
In the past two years, Prometeo has solidified its position as a leader in fintech infrastructure in Latin America. We’ve expanded our network to include more than 500 APIs across 283 financial institutions in 10 countries. This focus on building robust partnerships and penetrating new markets has driven our sales to increase tenfold from 2021 to 2023. Our commitment continues to be on enhancing connectivity and increasing access to financial services throughout the region.
We are constantly expanding our offerings and the user experience. For example, with account-to-account payments, Prometeo currently offers the option to generate payments through personalized links and QR codes.
Additionally, Prometeo currently supports bank account validations in six Latin American countries including coverage to 100 per cent of banks in Mexico and Brazil.
This growth is bolstered by partnerships with global banking heavyweights including:
Citi
Bank Santander
Banco Estado from Chile
Banco de México (SPEI)
It is also supported from investors such as:
Antler Elevate
PayPal Ventures
Samsung Next
Cometa
Magma Partners
How has the company’s expansion into Chile and Mexico gone?
Prometeo’s expansion into Chile and Mexico has been a strategic move to enhance financial inclusion, prompted by the increased demand for more robust financial operations and refined regulatory frameworks in both markets.
In Mexico, we have achieved 100 per cent SPEI bank coverage, facilitating comprehensive access to financial services. Having launched our accounts-to-accounts payment solution earlier this year, it is expected that we will see continued momentum in this region both at a business level as well as for our operations and team.
In Chile, we anticipate expanding our presence in the latter half of the year. Already partnered with Banco Estado, we aim to broaden our reach further in the months ahead.
Final thoughts
Prometeo is focused on enhancing financial inclusion. We want to overcoming historical barriers in Latin America’s financial ecosystem. As each country implements its own rules, achieving interoperability between nations will pose significant challenges, particularly for service providers aiming to expand internationally.
Prometeo’s priority is to generate solutions and to move the needle by addressing the challenges that are created by the uneven financial landscape. Our solutions and partnerships make us a significant player in the region’s fintech landscape.
The market for financial services in LatAm is immense, with millions of households still outside the traditional banking system. Given the region’s population and the up-and-coming tech boom in countries like Brazil and Argentina, there is a substantial opportunity to impact underbanked segments.
As we expand, we aim to increase our impact across Latin America and explore opportunities in the US market, building on our successes in Brazil and Mexico to further digitization and financial inclusion.
The post Em Conversa: Understanding Open Banking Benefits for Businesses and Consumers with Prometeo appeared first on The Fintech Times.
