Open Banking and the Future of FinTech in Latin America
From May 30-31, I had the opportunity to attend and speak at the exciting FinTech Conference Latam 2018 in Lima, Peru. The event, organized by Google Developers Launchpad Accelerator and Alta Ventures, sought to bring together the main regional FinTech thought leaders to share, discuss and help local stakeholders understand the current FinTech trends that are shaping the financial industry. C Minds was invited to speak about our work in Mexico on a groundbreaking new regulatory system to promote competition and innovation in the financial services field: Open Banking (read our Open Banking 101 blog post). The presentation focused on its potential to solve some of the biggest challenges of Latin America’s financial services industry. Namely, a lack of choice and innovation for consumers and the prevalence of financial exclusion in the region. Although many countries across the globe have started working towards their own Open Banking Standard, much of Latin America has remained outside the conversation. To date, only Mexico and Argentina have publicly looked into its potential for their economies. Mexico’s FinTech Law, published in March of this year, places the country as a global open banking leader by calling for the development of standardized APIs within the next 24 months. C Minds has been leading the conversation with the publication of a report on the potential of Open Banking for Mexico in collaboration with the Open Data Institute (UK Open Banking leader) and the FinTech Hub. In the Latin America region, Argentina has also taken steps towards the development of its own open banking initiative with Open Banking Argentina, a company made up of leaders in the industry who have come together to promote the development of open data/open banking models. They offer courses and trainings to their members. An initial analysis of the Peruvian financial services ecosystem highlights the potential and challenges for Open Banking. In terms of the ecosystem, the lack of a representative body for banks and another one for FinTechs would make in-sector and cross-sector conversations nearly impossible, a key element of the creation of an inclusive standard. Beyond this structural difficulty, one should note the country’s FinTech ecosystem is extremely ripe, with only 45 FinTechs. One of the reasons cited for their limited presence is a lack of investment in and investment channels for Peruvian startups as a whole, despite growing government (StartUp Perú) and private (Wayra, Endeavor) efforts to support their development. (To date there is no program designed to solely support FinTechs.) A lack of success stories is partly to credit for this lack of investment. The question that comes to mind when it comes to Peru’s FinTech world is that of the chicken and the egg: should investment come first to promote innovation, or should innovation be prioritized to bring more investors? A hybrid approach would probably be most effective. Another challenge faced by the country’s startup scene is the lack of regulations that facilitate innovation. The ecosystem deplores the lack of a law similar to those present in Mexico, Chile and Argentina that enable the creation of a company in just one day. To my great pleasure, much of the event was dedicated to discovering the latest, most innovative FinTech developments, many of which brought with them tremendous social impact. Paykii, for instance, is a Mexican startup that enables global bills payments via a blockchain powered platform. This solution was developed to help migrants support their families from a distance by cutting all middlemen in the process of sending money home to eliminate losses caused by potential commissions charged along the way. As most of this money is used to pay bills once it reaches its destination, Paykii effectively reduces a great share of the losses incurred in transferring money. Another example is PayKey, a FinTech that facilitates payments between people by adding a payments key to the mobile phone’s most used app: the keyboard. Beyond its innovative aspect, what is revolutionary about this solution is that it is also usable by the unbanked. No matter what app is being used and no matter what one is doing, one can make a payment to any contact simply by clicking the payment key and inputting the amount of money to be sent. Both Paykii and PayKey are excellent illustrations of the direction of the FinTech sector. If one thing is sure, it’s that the financial services industry with continue to surprise us with solutions that solve some of society’s biggest challenges. At C Minds, we believe in tech development for the greater good. We also believe that Open Banking has exceptional potential when it comes to accelerating innovation by providing financial service companies with more tools to design groundbreaking solutions and we are focusing our efforts in Mexico on promoting the development of new financial products and services that contribute to solving systemic challenges in the Latin American region such as financial exclusion and gender inequality. Follow our progress via social media and on the www.openbankingmx.com page.