Fintech: 4 business models that illustrate the transformation of the financial industry
Driven by technological progress and the lack of trust in banks after the 2008 crisis, technology companies that provide financial services – better known as Fintech- continue to grow and revolutionize the sector’s industry.
Never ending delays to open an account, apply for a loan or take out insurance, coupled with a crippling bureaucracy, are issues that new technology users are not willing to tolerate. In this way, changes to meet the new demands of users are coming through emerging companies (startups) that bet on new business models in the midst of a thriving digital era.
In that setting, ambito.com participated in the “Industria Fintech” meeting, organized by the Universidad de San Andrés in conjunction with the Argentine Chamber of Fintech, where business leaders talked about their projects and the need to adapt to a new competitive environment.
The first presentation was given by Bruno Ferrari, co-founder of the “Insurtech” 123Seguro, a leading online broker in the country. It is a startup that began operating in 2010 based on the idea of transparency and streamlining the supply of insurance, mainly cars, by reducing hiring time and costs.
The company, that also operates in Colombia, has a digital platform and an application that provides advice for the purchase of insurance, comparing prices from different companies, including any type of operations such as in an accident.
According to its co-founder, fintechs have three pillars that provide advantages over the traditional financial system, such as “being simple, fast and transparent and operate anywhere at any time online and on mobile phones”.
“Today we are leaders in the Argentine Internet market, with more than 30,000 policies sold and 300,000 quotes made,” remarked Ferrari before a packed audience.
The second speaker of the event was Alejandro Cosentino, vice president of the Argentine Chamber of Fintech and co-founder of Afluenta, a collective financing digital platform. It is the first collaborative finance network that administers loans to people that want to make their money work.
“Applying for a loan through Afluenta is easier, faster and safer and, given that several people compete to participate in the same loan, the interest rates may be lower than the ones the applicant publishes. And, the investors, with their investment offers, can also obtain excellent profitability by offering better rates to those who apply for credits. This way, everyone wins. ” said Cosentino.
He emphasized that the loans granted are paid off in 12, 18, 24, 36 or 48 months and the monthly fee results from applying an interest rate value that arises from the competition among investors seeking to place their money at a higher interest rate than obtained from a fixed term deposit and lower than personal loans in the traditional banking system.
He also added that each loan is auctioned on the platform for 10 days or until it reaches 100% of the requested amount, whichever happens first. At that time, the auction closes automatically, generating a more effective funding for the requestor and a better return for the investor.
Cosentino described: “What we do with Afluenta is to replace the banks by uniting the parties (investor and applicant). We are a bridge that takes away the intermediary”,
Afterwards, it was Matías Friedberg’s turn. He gave details of the experience with Grouit, one of Ixpandit’s company service lines, that provides financing to SMEs online, without documentation and with immediate implementation.
Friedberg began his presentation by providing data from the World Bank that sustains that there is an unsatisfied demand for credits of 380 million dollars in Latin America, which accounts for the potential of the company. “There is a segment of SMEs that is not at all served by the financial system,” he said.
Finally, Santiago Bugallo, director of Hispanic markets of Mercado Pago (a system that has Mercado Libre to carry out transactions), spoke about “Payments and Transfers” in the Fintech world and stated that “currently people do not want to step into banks”.
In that sense, he mentioned the benefits of the virtual wallet, a service provided by the Mercado Pago platform. Among the services are: the possibility of recharging the cell phone, sending money, paying with a QR code, issuing payment buttons and investing and paying for services.
“Today 35 million people buy recurrently some product in Mercado Libre and through Mercado Pago, the advantage of our platform is that it has no costs,” he said.
He also added that Mercado Pago’s main competitors are not banks nor most fintechs, but cash. “The idea is that people can have their wallet on their cell phone, 80% of the Mercado Pago transactions are for cell phone recharge and to upload and pay for services by scanning the barcode,” he said.
He concluded: “We believe that the future is outside our Marketplace and it is carrying out an aggressive strategy regarding QR payments and the virtual wallet.”