By Ricardo Assaf is president of ABSCM - Brazilian Association of Microcredit Societies.
In the conversations and backstage of the financial market, people often hear about “fintechs”, an expression derived from the merger of two words in English financial and technology, startups that can create a great challenge for the banking sector. The main issue is the real impact they can have for financial institutions, which are conservative in nature, and their business models and the respective impact on consumers.
Currently, Brazil has 250 fintechs in operation and half of them already have an invoice above R$ 1 million, according to the report by FintechLab - the largest hub for connecting and fostering the ecosystem of financial technology startups with national coverage. Report 2017 has just been launched, a kind of radar that monitors the market.
The survey identified 247 initiatives distributed in the Payments categories, representing (32%), Financial Management (18%), Loans (13%), Investments (8%), Funding (7%), Insurance (6%), Debt Negotiation (5%), Cryptocurrencies and DLTs (5%), Foreign Exchange (4%) and Multiservices (2%). The study also revealed that companies from other sectors, such as technology, retail and telecommunications, are keeping an eye on the opportunities generated by this movement.
Before making a hasty conclusion, it is important to know a little about the history of national banks and their relationship with technology. Unlike Europe, in which the large Telecom companies dictated trends and investments in new models and technologies, in Brazil, large banks have always been the precursors and great supporters of the use of new technologies, especially in the retail segment. It is known to few that the first major bank in the world to adopt the internet as a form of relationship with retail customers was a Brazilian bank, with great repercussion in the country.
It was one of the first companies in Brazil to use computers for business management and one of the first banks in South America to automate operations. In 1980, this same institution already held the leadership in technology in its processes, initiating the technological revolution in the financial market, with the communication of data via satellite, in addition to inaugurating the first home banking, considered at the time an unprecedented customer service . In the following year, the system for using magnetic cards to carry out online banking operations is launched.
In the view of financial institutions, especially large banks, there is no lack of reasons to understand the reason for the concern and investments. The almost continental size of Brazil, the need to serve people in remote places at a competitive cost, the fact that Brazilian users are more adapted to new technologies, intelligence in risk control, both in operations and processes, among many other reasons, support this theme. For these and other reasons, banks have always been the ones that have invested the most, and invest in, technology.
Data from the Febraban Banking Technology Survey in 2015, carried out by Deloitte, showed that, among the Brics, Brazil is the country that most allocates IT resources in the banking sector. The value directed by the banks is, in general, in the order of R$ 20 billion, average registered in the last five years. We occupy the seventh position among the ten largest economies that make the most investments in technology, alongside Germany, France and India.
In the past, managers and agencies had a major impact on the relationship with the end customer, basically a personal relationship that extended outside the agency and allowed a deep understanding of the risks. Today, this relationship in retail is practically canceled by the use of complex systems in the branches, which eliminated the limits and the decision-making power of managers and directors. But, after all, what is the relationship of this with the fintechs?
The financial sector needed technological platforms that, in addition to innovating the existing bureaucratic process, are capable of bringing customers and institutions closer together in fractions of a second. They are disruptive technology startups, that is, they offer a leaner, more accessible business model, projecting a larger profit margin, as well as connecting the entire market, streamlining the offer of financial services. They are agile and with great freedom and creativity, managed by young entrepreneurs who understood that plastering and capital concentration are, in fact, opportunities.
On the other hand, most financial institutions concentrate valuable information from their clients' behavioral database, specialization in niches, tradition and reputation in the market, as well as an ability to generate, with the market, perennial funding for operations. For example, Microcredit Societies - SCMEPPs - authorized and regulated by BACEN, started using technologies to make access to the final customer more efficient: in practice, the technologies currently used as tablets and mobile, some created by fintechs, aim not to just make the transaction cost cheaper for the end customer, but also create experiences, simple and direct languages for audiences and niches that are often marginalized in the traditional financial system.
There is a great synergy between fintechs and financial institutions, regardless of size and segment. The innovation capacity they have, combined with market knowledge, tradition and the funding capacity of financial institutions, can generate a huge gain for end consumers, not only in financial matters - with simpler and cheaper products and solutions - such as also develop a more pleasant, direct and efficient relationship experience.
Currently, Brazil has 250 fintechs in operation and half of them already have an invoice above R$ 1 million, according to the report by FintechLab - the largest hub for connecting and fostering the ecosystem of financial technology startups with national coverage. Report 2017 has just been launched, a kind of radar that monitors the market.
The survey identified 247 initiatives distributed in the Payments categories, representing (32%), Financial Management (18%), Loans (13%), Investments (8%), Funding (7%), Insurance (6%), Debt Negotiation (5%), Cryptocurrencies and DLTs (5%), Foreign Exchange (4%) and Multiservices (2%). The study also revealed that companies from other sectors, such as technology, retail and telecommunications, are keeping an eye on the opportunities generated by this movement.
Before making a hasty conclusion, it is important to know a little about the history of national banks and their relationship with technology. Unlike Europe, in which the large Telecom companies dictated trends and investments in new models and technologies, in Brazil, large banks have always been the precursors and great supporters of the use of new technologies, especially in the retail segment. It is known to few that the first major bank in the world to adopt the internet as a form of relationship with retail customers was a Brazilian bank, with great repercussion in the country.
It was one of the first companies in Brazil to use computers for business management and one of the first banks in South America to automate operations. In 1980, this same institution already held the leadership in technology in its processes, initiating the technological revolution in the financial market, with the communication of data via satellite, in addition to inaugurating the first home banking, considered at the time an unprecedented customer service . In the following year, the system for using magnetic cards to carry out online banking operations is launched.
In the view of financial institutions, especially large banks, there is no lack of reasons to understand the reason for the concern and investments. The almost continental size of Brazil, the need to serve people in remote places at a competitive cost, the fact that Brazilian users are more adapted to new technologies, intelligence in risk control, both in operations and processes, among many other reasons, support this theme. For these and other reasons, banks have always been the ones that have invested the most, and invest in, technology.
Data from the Febraban Banking Technology Survey in 2015, carried out by Deloitte, showed that, among the Brics, Brazil is the country that most allocates IT resources in the banking sector. The value directed by the banks is, in general, in the order of R$ 20 billion, average registered in the last five years. We occupy the seventh position among the ten largest economies that make the most investments in technology, alongside Germany, France and India.
In the past, managers and agencies had a major impact on the relationship with the end customer, basically a personal relationship that extended outside the agency and allowed a deep understanding of the risks. Today, this relationship in retail is practically canceled by the use of complex systems in the branches, which eliminated the limits and the decision-making power of managers and directors. But, after all, what is the relationship of this with the fintechs?
The financial sector needed technological platforms that, in addition to innovating the existing bureaucratic process, are capable of bringing customers and institutions closer together in fractions of a second. They are disruptive technology startups, that is, they offer a leaner, more accessible business model, projecting a larger profit margin, as well as connecting the entire market, streamlining the offer of financial services. They are agile and with great freedom and creativity, managed by young entrepreneurs who understood that plastering and capital concentration are, in fact, opportunities.
On the other hand, most financial institutions concentrate valuable information from their clients' behavioral database, specialization in niches, tradition and reputation in the market, as well as an ability to generate, with the market, perennial funding for operations. For example, Microcredit Societies - SCMEPPs - authorized and regulated by BACEN, started using technologies to make access to the final customer more efficient: in practice, the technologies currently used as tablets and mobile, some created by fintechs, aim not to just make the transaction cost cheaper for the end customer, but also create experiences, simple and direct languages for audiences and niches that are often marginalized in the traditional financial system.
There is a great synergy between fintechs and financial institutions, regardless of size and segment. The innovation capacity they have, combined with market knowledge, tradition and the funding capacity of financial institutions, can generate a huge gain for end consumers, not only in financial matters - with simpler and cheaper products and solutions - such as also develop a more pleasant, direct and efficient relationship experience.
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