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Disruptive & Traditional: The Interconnection of Fintechs with Banking

With disruptive and innovative solutions entering the payment ecosystem from both new players as well as specialized actors, the need to scale up your product offer to remain competitive has become an imperative.

For decades, the payment industry has remained within the traditional spectrum, adhering too strictly to established rules and definitions when handling money. However, with the progressive economic opening in the region and the emergence of new needs when considering payment options, changes began to be introduced inthe laws that affect traditional financial institutions.

In the case of Uruguay, for example, as of Law No. 19,210 or Law for Financial Inclusion, it was established that, since 2015, all workers, passive and beneficiaries of social benefits, have the right to recieve their benefit payments thru electronic means or with a debit card liked to a bank account, which led to the boom in the adoption of the latter.

On the other hand, the liberalization of the acquiring marketplace was another critical factor in transforming the industry, making room for new players to innovate and satisfy the needs of sectors of the population thatwere limited by the number of requirements thatraditional banks imposed when offering different payment alternatives.

These new players, which took the form of startups or fintechs, gradually entered the market where the traditional big players rules and, through new legislation, such as the creation of IEDES (Electronic Money Issuing Institutions) in Uruguay or the Fintech Law in Mexico, began to make headways towards the administration of people’s money, a task formerly reserved exclusively for banks.


Specifically, the emergence of fintechs came to make the old products established by banks more flexible and dynamic with the creation of new payment methods such as digital cards, activation processes handled through QR codes, digital onboarding, and more, which opened up possibilities so that unbanked customers could easily manage their money flows.”

Sebastián Franco
Pre-sales general manager

Although the creation of these new channels, applications, or financial devices displaced part of the importance of traditional ones, it has also brought about modernization and growth opportunities for banks, in addition to offering them proximity to the customer. On the other hand, these startups benefit from the strength and support provided by their predecessors.

Towards an open model


Despite standing out with much simpler and more flexible alternatives, fintechs soon realized that, within the closed circuits in which they often operate, they are limited to a limited number of customers and, at the same time, to a very low probability of getting to scale their business. This problem is what had led them to open up.

Buyers’needs today lie in the possibility of expanding the spectrum of payment methods that operate within a great numbers of channels and places. Likewise, from the acquiring side, the urgency is to be able to accept all types of payment methods,not only those from a single digital wallet.

Now, how can these small companies participate in the market with the big players and vice versa? This is whereEvertec takes center stage, acting as a key actor interconnecting these two worlds, in a way where both players obtain benefits and profit from new business opportunities, which, also contributes to continuing modernizing the industry.

By speaking the language of both the traditional players and fintechs, Evertec works as a bridge so that the fintechs can enter the systems where banks operate and, in parallel, have the opportunity to access key elements that today are an essential industry requirements, such as transaction capture, including alternative methods (QR, ToP and Biometrics), credit account management services, access to loyalty platforms, fraud detection tools, tokenization, 3DS, dynamic DCVV and many other solutions that Evertec provides as a payment processor.

Financial inclusion


An essential part of the modernization of the payment industry connects with financial inclusion, which, according to the World Bank, is the possibility of giving access, both to individuals and companies, to various valuable and affordable financial products and services that serve their financial needs -in terms of transactions, payments, savings, credit, and insurance- in a responsible and sustainable manner.

For Evertec, this is a fundamental issue when it comes to interconnecting the traditional and new,emerging players in the industry, in which the sum of all participants generates a more accessible and flexible landscape for everyone.

 

By: Sebastián Franco
Pre-sales general manager – Evertec

Sebastián Franco

Sebastián Franco

Professional with over 12 years of experience leading complex projects and pre-sale processes at the corporate level with exhaustive knowledge of the Latin American market, payment systems, fraud prevention, and digital services for the payment methods, services, and financial technology industry.

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