LatAm may be one of the fastest growing markets for companies like Uber, AirBnB and Instacart-type delivery companies, but don’t expect that rapid expansion to reach its full potential if drivers, hosts and end customers can’t have the full user experiences that made them earth-shattering. The same goes for Amazon, Alibaba and other international digital-natives looking to turn LatAm’s huge urban centers into major growth markets.
Yes, LatAm e-commerce and m-commerce are accelerating, driven by gig and shared economy players and others who demand more agile, open and fast-scaling financial services. But, those digital-native companies are built on interconnected platforms that consume financial services very differently from traditional corporate customers.
As these companies and others engage LatAm markets, they become intimately familiar with the region’s payments pains and the drag that they (and cash) can put on scalability. More to the point, current legacy financial infrastructures present a kind of information asymmetry that threatens growth.
Maybe that’s not news, or that LatAm’s legacy core banking and payments infrastructures lack sufficient interoperability and are transforming too slowly to meet the demand for a new breed of mobile and digital transactions. However, what’s less appreciated is how that lack of flexibility is becoming a growing problem for bankers wanting to gain and retain relationships with corporate innovators and SMEs “going digital native” across almost every industry.
The Business Banker’s Dilemma
Evidence increasingly reveals that these companies are quick to change banks if they can’t get the services they want. For example, in a recent transaction banking survey by Ovum, 80 percent of respondents in countries without real-time payment infrastructures said they have considered moving main banking relations in the past year.
The question becomes this: How do banks, financial institutions and others leverage their existing technology while simultaneously gaining the agility they need to win and keep business in the emerging and inevitable digital economy?
At NovoPayment, we decided to embrace the open API movement and invested in a bank-agnostic, multi-country developer portal, making over 30 of our most important pieces of software available for free for others to experiment. We went against a long and now outdated tradition in technology and financial services of being closed and guarded, and instead opened doors that others could walk through to build on our IP and help them (and us) to further monetize our investment, without sacrificing security or compliance. What was a radical idea just two years ago, seems today – against the backdrop of open banking and broader IT trends — a rather practical move.
The Reasons Why
The idea behind the Developer Hub is to enable banks, financial institutions and Fintech’s of all sizes to better attend to their corporate customers through the kind of integration and orchestration they actually need to serve today and tomorrow’s end customers.
By lowering barriers to test concepts and deploy them on solid foundations, we accelerate not only innovation, but also the expansion and diversity of the ecosystems that we can all be a part of.
Of more immediate importance, we accelerate time to revenue for all parties which is critical for skeptical banks making their first forays into these kinds of partnerships and for whom “quick wins” and proofs of concept are critical, but is also very attractive for agile startups who by their natures must be fast and frugal with their resources.
In short, we believe the time has come for organizations across the region to concern themselves with understanding the open API movement, for the sake of their customers and other stakeholders. Our advice: make the necessary organizational and technological investments to open.
Today’s disruptors and tomorrow’s market leading companies will run on interoperable cloud platforms that talk to one another in real-time. It’s a world based on open APIs, middleware and business rules — and a world you can join more easily than you realize.
To learn more, we invite you to visit our Developer Hub and join our community at Developer.NovoPayment.com.
The International Finance Corporation in Washington, D.C. extended an invitation to NovoPayment’s CEO, Anabel Perez, to join the panelists at their 2016 Fintech CEO Summit. The invitation-only event brought together founders and CEOs of Fintech companies from around the world to discuss current issues, exchange experiences, network, and do business.
NovoPayment participated in the “Banking in the New Age: Deposits” session, focused on different perspectives for deposit-taking. The primary question was, “Is the core architecture of banking changing?” For centuries, banks have intermediated between savers and borrowers. But that may be changing now. Traditionally banks owned direct relationships with their customers and provided customer facing services for all financial products. Consumers basically went to the closest bank branch from their homes or work places to open up a bank account, lend money and make investments into financial products.
The massive adoption of FinTech in recent years by not only existing financial institutions but also many disruptors in the deposit-taking business has resulted in drastic changes in consumer behaviors. Nowadays people face multiple channels of financial transactions and store their values in multiple stored value accounts. Although these new media still utilize traditional bank/payment rails to process payments and store values, we’ve started to see disruptive use cases which could potentially change the dynamics of deposit-taking businesses. During this session, the panelists discussed the future of deposit-taking dynamics and the potential implications.
In Latin America, where NovoPayment is focused, we see a lot of opportunities, the strong influence of trends from the U.S. and Europe, but also recognize a different picture. It is a less evolved marketplace, which moves slower, and requires a more hands-on investment of time and resources to integrate and innovate. There are also many markets, each with different local networks, standards, laws, and regulatory entities.
Furthermore, in Latin America, we don’t see core banking as really changing or the ultimate role of banks as being under threat. Banks are unique, highly regulated institutions in terms of their role and abilities. What we see instead is innovation around the core, an opportunity to enable banks and others to innovate and integrate more quickly and securely. In our region, we think true deposits will ultimately reside in financial institutions (e.g. pool accounts), but the future is in new cash-in/cash-out methods, integrating, and closing gaps. We must recognize the importance of stored value as well established vehicle with a lower cost of maintenance than a traditional deposit account. In this region, reloading networks in deposit-taking and the integration with ATM networks and global acceptance networks (MC/Visa) is extremely important.