“Every company in the not-too-distant future will be a Fintech,” said Angela Strange, general partner of a16z, one of the largest and most important Venture Capital funds in the world. So now the business is not just about having technology, but also about offering financial technology to your customers.
And you might be thinking “why stick your nose where I’m not being called?” Only you are being called. With the growing innovation in the financial sector, companies are buying or internally developing their own financial services startups. In December 2020, for example, Magazine Luiza opted for the first strategy and acquired Hub Fintech for R$290 million. Colombian Rappi chose the second option and created its banking services branch Rappi Bank, integrated with its application.
Has everyone gone crazy?
No. Everyone is seeing an opportunity. And a big one, mainly because with the Fintech as a Service (FaaS) model, your company does not need to acquire a financial company or create an infrastructure to offer this type of service. You don’t have to get involved in development, legislative bureaucracies or even invest a mountain of money to provide financial services.
In Brazil, this is a very new concept, with Grafeno as one of the main references offering this type of service. In a very playful way, we can say that we built a bank (and all the systems that involve this process) made of Lego pieces. A company that wants to offer financial services chooses those that best fit the profile of its customers and can provide solutions in about 40 days. That fast.
Give me reasons (not just one, but a dozen)
1. Value generation…
The biggest advantage of offering financial services is being able to leverage a customer base already familiar with your company’s ecosystem of products or services, enhancing the relationship with those consumers. Imagine: for the customer it makes much more sense to have a financial relationship with a company that is present in their daily lives.
2. … and revenue
Having a FaaS solution doesn’t just mean offering financial services to your customers, but also adding more products to your portfolio, with more revenue-generating options. Do you know the interest and fees that make banks make exorbitant profits? Have you ever imagined your company participating in this?
3. Competitive edge
The financial sector has been one of the main targets of the innovation ecosystem, which has brought technology and automation to the clients of companies that offer financial solutions. Being a more modern player will be perceived by your audience in the advantages that technology will offer them: more agility and convenience. Sell more than your competitors and there is nothing better than giving your customers more alternatives and options.
Marketing guru Philip Kotler says that getting a customer costs 5-7 times more than keeping them. This gives us an idea of how easy it can be to lose a customer to the competition. But, as I said above, presenting competitive advantages with more personalized and less bureaucratic financial solutions — that address your customers’ pains — will help you a lot on the retention journey. If your customer sees you not only as a supplier, but as a provider of solutions, including financial solutions, you will surely be remembered much more.
5. Cost reduction
I’m not even going to linger on this reason because for a good saver, half a penny is enough. The account is simple: fewer intermediaries (in this case, the bank) equals greater savings, whether in the cost of transfers, bank fees or the generation of bills, among others. And between using a FaaS platform or building a bank from scratch, I don’t even need to say which makes the most sense, right?
6. Aggregated information
How many different platforms do you need to open to run your business or do your work during the day? I bet several. And it’s not your fault — solutions for almost every type of management are pulverized rather than aggregated. Now, imagine being able to view your financial balance directly on your ERP platform. It just doesn’t get any better than your company being the system that provides the banking infrastructure to your customers.
7. More security
FaaS services are performed using the most modern technologies and this means much more security for everyone, especially when consumed via API. Your customers will love not having to type 40 numbers every time they pay a bill. Furthermore, by exchanging data and information without relying on human interaction, the chances of fraud are much lower.
8. Credit to customers
This is the pinnacle of a fintech because you offer credit to a customer base you already know, generating interest income and helping those in need of money have an option other than the bank. And since credit is a means to a greater goal, it makes much more sense for it to be offered by a company that is in the context of the user’s ultimate purpose. To illustrate: if you have a transport company and offer credit to the truck driver who provides services for your company, it makes sense to offer credit to him because you understand the flow and characteristics of his financial reality.
With a company with more agile processes, diversified product portfolio, reduced costs and loyal customers, your company’s value increases. Quinto Andar, which emerged as a PropTech (startup in the real estate industry), for example, started to offer a line of credit to its brokers and photographers, allowing partners to anticipate up to 70% of monthly earnings (remember the synchrony with partners in item 8?). The company has just reached a valuation of R$4 billion.
10. Why not ride the wave?
So, remember the entrepreneurs who were afraid of cloud technology and lost share of their markets that I mentioned above? Well then, it is necessary to face technology as an irreversible reality and understand that it is just like that: fast and disruptive. It may seem that having your own digital bank is a very distant and unrealistic idea for your company. But is it really? Think. Think more.
Because, a few years from now, you may have missed an incredible chance to turn your business around.
Paulo David is founder and CEO of Grafeno, fintech which provides digital accounts and electronic records infrastructure for businesses and lenders; and is a partner at SPC Brasil in the construction of infrastructure for the financial market. Before Grafeno, he founded Biva, the first peer-to-peer lending platform in Brazil, which was acquired by PagSeguro, a payment means company. He was superintendent of Sofisa Direto, the digital division of Sofisa bank. He worked on the team at Pinheiro Neto Advogados, and on the team at the investment manager KPTL (formerly Inseed Investimentos). He is an angel investor in fintechs in Brazil and Europe.