Usually, bureaucracy tends to be one of the main features of the banking system. However, what if an emerging initiative would propose the same (and many other) traditional banking services, only with no bureaucracy?
Therefore, Fintechs are organizations entirely focused in both quality and quick service, agility and full bureaucracy decoupling. Etymologically, its name came from the combination of both terms Financial and Technology.
A Finthech, however, goes beyond financial technology and resonates with a new exponential organizational model.
They have been used to operating through apps, giving away paperwork, digitalization and demonetization, even though this may sound ironic when it comes to a financial organization.
This occurs because the methods through digital paths always show up to be much cheaper. Therefore, Fintechs let go of big structures and big banks.
The Financial Technology market has not stopped growing also in Brazil. In an analysis made in between the years of 2017 and 2018, this type of tech overtakes 66%, according to the Inter-American Bank of Development (IBD).
In Brazil, we own the biggest number of financial enterprises based on technology. There are over 600 Fintechs in plain action. From three Fintechs two of them are in advanced development state, providing many standard services and traditional financial systems to banks in general.
Fintechs allowed this activity using the progress of digital systems, whenever a big part of banking operations are able to happen online.
Fintechs grow even more because they make it possible for payments, wire transfers, bank loans and funding to happen through a single mobile phone. Who would not want such convenience?
What are the main features of a Fintech?
The main feature of a Fintech is to provide 100% of its services online. They make it possible through the rise of wire transfer technology.
The client experience focus is an emphasized detail. Consumer Experience concepts and Design Thinking are a part of Fintechs’ DNA.
One of Fintech’s main priority is usually delivering products focused on experience, providing customers’ needs and personalizing the deliveries.
By operating based on data strategy, the technology allows the use of big data, Business Intelligence and A.I (Artificial Intelligence) in its processes.
With this technology, it constantly develops system and service portfolio updates. As a technology company, Fintechs are not afraid of innovating, testing recurrently new functionalities and changes on their business model.
They are constantly searching for improvement in their products and services, watching closely their customers’ reaction. Another important feature is to observe the market, identifying unexplored areas, filling up its blanks.
The difference between Fintechs and Traditional Banks
Of course, these two institutions come closer to each other in numerous aspects, analyzing their users’ profiles for the safety of their transactions, for instance. It is evident, however, that the digitalization of automated systems allow more agility to Fintechs. Traditional banks, on the other hand, keep having their local agencies as the main point of contact and service to their clients. Fintech operations are 100% online.
Fintechs usually operate with much smaller fees, or even with absolutely no fees, in many operations with are the source of revenue for traditional banks.
According to Marcelo Bradaschia, one of the biggest specialists in financial technology in Brazil, and one of PUCRS online professors, Fintechs had the insight of putting things from the real world into the digital one.
Fintechs on the Financial Market
Brazil lives its best moment for the opening of Fintechs.
One of the reasons for this is the huge disproportionality of the Brazilian Market, if compared to the reality of other countries.
For many specialists, the following elements favor the opening of new Fintechs:
- Technology advance
- Proper regulation
- Customer effort in the appreciation of disruptive and innovative solutions.
Fintechs’ business models are being more and more incorporate by organizations.
Fintechs are making people question overpriced services. This makes the whole market rethink its expensive business models and its bureaucracy. The offer for better and cheaper services make big financial institutions to provide better services.
Worldwide Panorama
Many specialists consider PayPal the world’s very first FinTech. Founded in 1999 in the United States (US), this tool allows its clients to generate payments and wire transfers without any bank mediation.
Nowadays, the world’s biggest FinTechs take place in the US, or some others are direct competition to bigger traditional banks, creating also an environment for partnerships. Millions of companies, which normally do not come originally from pre-existent companies.
There are some bigger disruptive attempts in the US, such as types of services that pass on real-time Bitcoin transactions through satellite. China also plays an important role in the world, with a scenario filled by companies that hold millions of users.
Companies such as Baidu, Alibaba and Tencent are new players on this market. “Big players” like these are responsible for pulling Asia’s billionaire Fintech market, investing heavily on new technologies.
Brazil, on the other hand, pictures a new context that does not move figures at the same levels like both U.S and China markets. However, Brazil has been granting access to an unbanked part of its population, especially during the last three years.
Foreign venture capital funds have been making investments in Brazilian fintechs, mainly for identifying potential. The financial market’s concentration in high taxes billed by credit borrowers opens a big gap for competition.
Nowadays, four banks own 80% of the credit market in Brazil. Fintechs are obviously aware of it. The appeal to try the “new” also has motivated new generations who are detached from traditional values. Younger people are subscribing to Fintechs, attracted by their strategies of word of mouth acquired clientele, with a short expense in marketing.
How to become a Fintech?
Brazil’s Central Bank (BC) has edited the 4656 resolution, regulating credit Fintechs forming a bank loan partnership among people, there is also the Society of Direct Credit (SDC).
In order to fit the criteria of the Central Bank, it takes structuring, such as building a company as an anonymous partnership and having a social revenue of, at least, R$ 1.000.000,00.
There is still fundamental aspects so that the Fintech is able to own thick legal structure and meet the requirements to accomplish the main requirement, according to the BC. It is also necessary a clear definition of agents and company’s paperwork, since board, management advisors and the supervising of other partners.
Following this definition, it is possible, alongside another requested factors, to have the correct authorization of function for SEPs and SCDs.
There is still some other politics to be installed inside a company such as this one:
- Corruption and money laundry prevention
- Conflict of interest prevention
- Privileged information supply
- Conduct of ethics code
- Disclosure of Information
- Donations and Contributions
It is extremely important to bring up aspects and own on structures of Corporative Governance to legally shape Fintechs of credit.
Conclusion
As seen on this article, the growth of Fintechs is a reality in the world’s financial market.
According to the research made by Price Waterhouse Coopers, about 33% of millennials believes that, in five years, having a bank account will not be necessary. The big innovation promoted by Fintechs have been responsible for this great change caused in the world of finances.
