- Investments in the fintech sector grow in recent months
- Lendingtech segment represents 21% of market share
- Credit within reach of your customers
- Secure options to offer loans
- User validation to avoid fraud
- New digital financial services
In recent months, fintech companies have shown us that the services they offer are in great demand because of their usefulness, with special attention among users and investors.
Investments of private equity funds in Latin America directed to fintechs reach 7,000 million dollars since 2016, in the last 18 months is when 50% of the resource has been invested, that is, technological disruption detonated the accelerated growth of companies in the financial sector that use technology to provide their services.
By 2021, Finnovista, a company dedicated to financing innovation and building startups, reported a 16% growth in the number of companies in Mexico. It went from 394 companies in 2019 to 441 firms in 2020 and finally to 512 organizations incorporated in Mexico in 2021 with further growth forecast for 2022.
The segment that stands out the most is lendingtech (loans), which represents 21% of companies in the industry in Mexico; sectors that together with paytech (payments and remittances) wealthtech (investments) and insurtech (insurance), are the trends in the region and have had the highest growth in the four countries that make up the Pacific Alliance: Mexico, Chile, Peru, and Colombia, which contribute 47% of the fintechs in Latin America.
Credit at your customers’ fingertips
The options for offering credit electronically are increasing and in a matter of minutes you can know if your client is eligible to receive a loan or a credit card outside of traditional banking. The nature of the product means that all procedures are online through a computer or mobile device.
The trend indicates that fintechs have catered to a sector of the public that is looking for easy and fast credit, without having to go to a physical location to apply for it or have long waiting times, with simple requirements that bring them closer to the service.
The efficient and timely response model offered by lendingtechs allowed a penetration in SME financing that exceeded 35%, serving millions of people who sought credit options to boost their businesses.
Safe options to offer loans
Regulation in the fintech sector is advancing and Mexico is being considered as one of the pioneer countries and at the forefront in the regulation of the industry, but there are still inconsistencies, so it is important to indicate that the Government of Mexico does not guarantee or support the money invested by users in companies of this new sector.
The Law to Regulate Financial Technology Institutions still has gaps, especially in terms of digital security, where it is not clear how applicants for these digital loan or credit services must be authenticated.
The Fintech Mexico association, through its Best Practices Committee, developed a complete code of values and guidelines to which its members must adhere for firms that grant loans digitally, but even in terms of digital security, the recommendation to ‘take reasonable and sufficient measures’ is still very ambiguous.
ReconoSER ID participated in December 2021, in the working table held by Fintech MX, with the main actors of Financial Technology Institutions, Electronic Payment Funds Institutions, Collective Financing Institutions and service providers of these new companies, to clarify the regulatory requirements of remote identification and identity verification of online users.
User validation to avoid fraud
A correct validation allows companies to give certainty to the services and applicants of loan or credit products, nowadays with biometrics it is possible to identify without margin of error if a customer has a history, if their data is truthful or even if it is a living person.
That is why ReconoSER ID, a Colombian startup recently arrived in Mexico, is promoting strategic alliances with Mexican fintechs that find in its advanced biometric validation solutions a secure way to collect information from their customers and new users.
When it comes to credit, it is better to be sure who is being granted, so a biometric proof of life can be enough for companies to confirm that the customer is real, reducing the risk of fraud and linking the information to other databases that allow feedback from the sector to keep criminals away while the legal framework is properly constituted.
A new era of financial services
The trend indicates that the economy will continue to digitize and fintech will play a very important role in Mexico, where only 37% of the population has an account in a financial institution and only 19% uses a credit card, according to Banxico data as of March 2021.
Point of sale loans, known as POS (point of sale) loans, allow users to purchase products under the slogan ‘buy now and pay later’ with digital entities that provide loans without the need for a credit card, one of the most popular options today.
It is important to mention the new credit cards granted by Neobancos, fintechs protected by a banking license that although they are not supervised by a government institution are increasing in popularity by offering advantages over cards from a traditional institution such as avoiding annuity payments, minimum spending, or commissions for cash withdrawals.
Financial services are in an expansive phase where digital products are gaining importance. The introduction of Banking as a Service (BaaS) consists of providing digital banking services to third parties and the Open Banking provided by the regulator will be fundamental for the creation of the corresponding legal framework and the interaction of the players in the ecosystem.
A regulated environment with a correct legal framework that includes biometric validation services of the population, will allow lendingtechs to increase their security protocols and with it, the trust of their users.
By Alfredo Gutiérrez Bayardi
Bibliography
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