Introduction
When you need to transfer money or pay bills, probably uses banks and financial institutions similar, correct? But a type of company that combines technology with financial services is changing this scenario: fintechs. Brazil is very well represented in this segment with startups like Nubank, Warren and GuiaBolso.
But what is a fintech, exactly? As services of the branch work? Why is this type of company can change the way the people manage the money? Is what you you’ll discover in the next paragraphs.
What are fintechs?
The term ‘fintech’ has emerged from a combination of the words in English financial (finance) and technology(technology). This name, by itself, sums up well the idea: fintech is all company that offers financial services that differ the facilities offered by technology and, indeed, by the Internet.
Under this point of view, you may not see a lot of difference in relation to the services offered by the banks. Banking institutions traditional work with technology quite sophisticated to assign access and security for financial transactions. This valley for management of current accounts, loans, services, credit card, investments, etc.
But, in a fintech, technology is used primarily to bring convenience through innovation: the the companies in the industry use technological resources widely disseminated to create methodologies, processes and tools that to facilitate the access to financial services. The result of these efforts appears to the user in the form of practicality, bureaucracy reduced, low costs, greater control over financial operations and so on.
Which services, the fintechs offer?
The fintechs can offer a wide variety of services, both for home users (individuals) as for companies and other institutions (people legal).
Some of these services do not differ much from that we find in banks and the like: supply card credit (including pre-paid), payment methods, funding, transfer of resources, insurance, etc.
Other services differ greatly, as those who offer platforms for which the customer can manage your finances with more clarity, or that allow other users — and not — bank offered small loans (in the countries in which this type of activity is allowed).
In all cases, the main difference lies in the focus that is given to the user experience: how we have already stated, the technological resources must bring practicality, ease of use, reduction of bureaucracy, among other attractions.
How fintechs work?
Each fintech has a proper model of business and, therefore, it’s impossible to scrutinize each one of them. But, as a rule, the companies in the industry direct their efforts in the development of solutions that cover the deficiencies or limitations of services traditional financial.
In other words, the fintechs use technology — especially in the context of the Internet — to give users the resources that banks and the like do not offer or even are offered by these institutions, but so more conservative, so to speak.
This differential is all possible because, in the majority of cases, the fintechs are formed by startups. This is the name given to a type of company, generally with little time existence, which creates and explores creative ideas to offer services and innovative products.
A startup technology, basically, identifies an opportunity — a the product or service that meets an unmet demand, or that you can do something better than what is already offered by the market — and uses technology to create media explore it. That is what happens with the fintechs.
Note, however, that it is important for a startup to adopt from the early measures to improve agility services and products offered, support significant increases of demand and transmit to the user’s perception of value. The best way to do this is to focus on quality, not in quantity: you may want to make few but excellent services or products that you offer several of them, but running the risk of losing the control over them on account of the dilution of focus.
In fintechs this principle is taken very seriously: a good part of the business segment provides products or services to you well specific. In most cases there is not, as in banks, a wide basket of services or anything like that. This is positive because the company is able to stay focused on improve your processes. In this way, potential customers understand quickly what each one offers.
A case study: the Nubank
Up to here, the approach about the universe of fintechs has been theoretical. To facilitate understanding, it is best to we study a real case of success. We will be using for this purpose the the proposal of Nubank, a company that probably occupies the post of fintech more popular in Brazil.
The Nubank emerged in 2013, but started to operate in 2014, providing only one product: an international credit card with the flag Mastercard. Until then, nothing much. All that is bank offers a credit card. So, what there are innovative there? The way the Nubank offers this product.
To begin with, the card has no annual fee, nor charges other rates. Yes, there are banks and operators also do not charge annual fees of the card, but, in most of the times, there are conditions associated with: client must perform at least one spent a month with the card or have a long time relationship with the company, for example. With Nubank there’s none of that: no customer pays annual fee and other charges, no matter its profile income or if the card is little used.
But the most interesting part — what makes the company innovative — is the smartphone of the user: is need to install an application from Nubank on an Android mobile phone or iPhone (iOS). This tool allows you to user have absolute control over your card.
Every time the customer uses the card, the application will show, as soon as the transaction is confirmed, the name of the company that received the payment, as well as the location of this in a map. The information about all the transactions are available in a timeline. In this way, the user always manages to know when and where you made each expense.
There’s more: the app also shows the limit of the user and how much of this has already been spent. This is a detail very important. The majority of banks offers, in maximum, an SMS notification every time a the transaction is carried out. The user does not it has, however, an easy way to know how much you have spent in the month. Many times it is possible to have this information on the site or on the mobile app bank, but it can take days for a transaction performed with the card to appear there.
This is dangerous. As the information on expenditures are unclear, many users end up not realizing that they spent too much and are not able to pay the invoice in full at the end of the month. The consequence, many often, it is the debt, because the interest charged on the cards issued in Brazil are ridiculously high.
With Nubank, the chances of debt are lower because the the user has an overview that is always updated of their expenses and, if you are not able to pay the invoice in full on the the end of the month, you will find interest rates lower (although not very) than those charged by mainstream institutions.
Using the application, the user can also request limit increase, let this limit below the available, to block the card temporarily, and contact the support of the Nubank via chat — channel that meets very well, by the way.
Realized the benefits? It is not necessary to embitter hours on the phone to negotiate rates, the information about spending are always available, it is possible to block a card quickly in case of loss(you can do this also via the website of the Nubank), the customer service is usually pretty helpful, there is no hidden fees, anyway.
All of this is possible thanks to the application — the technology in and of itself. As the entire service revolves around this tool, the Nubank do not need to have agencies or call centers complex (although there is attendance by telephone). These factors decrease the operational costs significantly. That is why the company is able to operate without charge. The recipe comes from the interest charged on their invoices offered, small percentages from each transaction made with the card, etc.
Also Note how the question of focus is important here: to offer a single product, the Nubank manages to stay centered in perfect it and simplify processes, which also helps to contain operating costs. In addition addition, the user knows exactly what to expect from the company: he no need to be analyzing various types of cards to choose which one is the best for your needs.
Fintechs versus banks
There is one question that is frequent in the universe of fintechs: these companies may compete directly with the banks? The answer short is yes, but it is not always’.
The business model of the Nubank is, again, an example of the be quoted: the company works with a product that exists in almost any bank, but bet on experience to to compete with these institutions.
In 2017, the company launched another service modality: the NuConta. This is an account of the payment rate that is controlled by the same application of the card. With it, the user can transfer money to other accounts, pay slips and leave the money there earning.
It is almost a current account. Almost because the Nubank do not have authorization to offer this (but want to reach there). The goal is to make front to the banks, but with a different approach: attacking the issues that customers often are these institutions.
Among the problems are users who do not able to take good advantage of the banking services for does not have to prove income or because they live in regions devoid of branches or atms.
It is also the case of the fintechs that work with credit card pre-paid. If the user you have debts or you are unable to prove income you will have the service denied because the card only let him spend the value that has been loaded as credit. So there is no risk of it should be to the institution. Traditional banks are not very fond of this modality of service.
Another example comes from the companies that provide platforms for that the user to make the financial control. These tools allow the person to manage better their expenses and accounts banking, another type of feature that is typically not is offered by the banks.
The fact of the operations of fintechs are almost exclusively online is also a differential important. The services of these companies integrate with the “routine” digital user: the target customers that are already accustomed to using smartphones or online services from your computer. Not for less, the the main clientele of fintechs is the public on the track between the ages of 18 to 34 years, the more familiar with the technology.
Banks, even that are increasingly focused on customer service electronic, depend much on the bureaucratic processes that many times end up being an inconvenience to the client (it needs to goan agency to resolve certain issues, for example).
When there are services that overlap with what is offered by banking institutions, the prevailing there the sense of competition: some banks have come to be inspiring in the business models of fintechs to offer similar resources, such as applications for control of credit card.
An example comes from the Ita. At the end of 2017, the bank launched the Credicard Zero to rival the Nubank and other cards fintechs. The Credicard Zero also does not charge tuition, has flag Mastercard, you have support via chat and, of course, is managed via the app.
It is not that these resources have not been studied or at least considered before the phenomenon of fintechs. The banks, by the consolidated structure and the traditional which have, usually have other priorities. Soon, applications or platforms on the web have always been more for resources additional than to the differential.
More examples of fintechs
In addition to the case of Nubank, you may want to know other companies that fall within the concept of fintechs to facilitate the assimilation of the idea. Note that each company is discussed in the following has a line of action different from the other. In common is the fact all they have presence in Brazil.
Warren
The savings pays very little money. Often, it is best to choose one or more investments that bring the most return. The problem is that a lot of people have difficulty to understand the “soup word search” of the brokerage houses or banks, or does not have time to invest. The Warren attacks these problems: the client may make investments from a site or an application that is very easy to use and understand.
A kind of “virtual consultant” is also called Warren uses algorithms to make investments in accordance with the profile of the the client, freeing you from having to monitor constantly the financial market.
PayPal
The term ‘fintech’ may be recent, but the concept, not: some companies in the financial technology emerged for years. In the case of PayPal. The company was established in 1998 and today has with global operations.
PayPal is mainly used to transfer money (including involving different currencies) and payments. In this the last mode, the user can make purchases in shops e-commerce, for example, and use your account PayPal to pay. In this way, it is not necessary to inform the credit card to the store. This information is restricted to PayPal, which is the intermediary of all the operation, passing the values to the company and, when appropriate, protecting the user from possible fraud.
Superdigital
Before you call ContaSuper, Superdigital is a company focused on customers “desbancarizados” or that have a current account, but are unsatisfied with the services provided by the banks. By creating an account on the service, the user can make payments or transfers of values for the cell, use the card pre-paid, to issue billets, etc.
The services offered are very similar to the made available by the banks. The main difference is that is all done digitally: there is no posts service or agencies. In addition to physical person, the the company offers services to companies.
The success of the business between the “desbancarizados”, attracted the the interests of Santander Brasil in march 2016, the bank, which already had shares in the company, now holds 100% of the shares of Superdigital.
ContaAzul
The ContaAzul it also offers a platform of financial management, only facing the companies of small and medium-sized businesses. Upon the payment of a monthly fee, participating companies can use the system to post the invoice, issue billets, analyse customer profiles, generate reports financial, etc., all of the online mode.
The services of ContaAzul, which include also a kind of ERP system: it is also possible to control inventory, log management vendors, send documents, control the cash flow and so on.
Vérios
The Vérios is a startup company that provides investment services, but exploring a concept quite innovative: the robo-advisor. In this modality, a system is in charge of assembling a portfolio smart for the investor taking into account various factors: risk, profitability, liquidity, diversification, etc.
For both, the customer must fill out a brief questionnaire. The from there, the robot Vérios indicates the portfolio more appropriate to the risk profile identified. The system of the company is permanent monitoring of the portfolio to find the best opportunities. It is possible to check out everything that happens in the site or application: they both offer information is clear and objective.
The services of the Vérios end up being a interesting solution for those who want to invest so smart, but don’t have the time or patience to keep track of all the nuances of the financial market.
GuiaBolso
The GuiaBolso it is a platform for personal financial management that will very in addition to the worksheets. To install the application (available for Android and iOS), the user must connect it to theyour bank account (almost all major banks are compatible). From there, it is can check transaction history, see balance, check card statements, etc.
The difference to what the banks offer on the Internet banking is striking: all the information are well organized and easily accessible. The expenditure, for example, can be categorized (education, health, transport, etc.), easy to understand charts help the user to reduce costs and so on.
For help in budget control in an easy way, the the service is increasingly gaining popularity: when this text was written, the GuiaBolso recorded more than 1.6 million users.
Minute Insurance
If you have already hired a safe for the house or car, for example, I know that this is not usually a task pleasant: it is necessary to search well for find the best prices and pay attention to details to avoid those “pranks” that we find in the between the lines. The Minute Insurance is an online broker that to aid in this task.
You do a simulation on the company’s website choosing the type of insurance you want (home, car, travel, among other) and the system performs quotations with various insurance companies, indicating those that offer the best prices and benefits.
Geru
You probably know that take financial loans in Brazil requires very careful, after all, the interest often are very high. The Geru is an online platform for loans that attacks this problem by offering lower interest rates.
Everything is done from the web site of the company: the person concerned makes a simulation, fill in your data, it waits for the assessment, you receive a proposal stating all the details (including the exact value of each installment to be paid) and expects the contract will be reviewed by a partner institution that will do the funding. The signature is made electronically from the digital certificate.
If everything goes right, the money is deposited into the account of the user on up to ten days.
F(x)
The F(x) (read ‘F of X’) is also a startup specialist in loans, only for companies. Basically, banks make available on the service plans of loans they’re willing to offer. At the other extreme, companies interested in obtaining financing if you register on the platform detailing what type of credit you seek.
The system F(x) does, basically, is to cross this two databases to find the plans of loans suitable for each company registered.
Regulation of fintechs of credit by the Central Bank
In April 2018, the Bank Central do Brasil formalized the Resolution CMN no. 4.656 (link in PDF), which regulates the activity of the fintechs specialized in credit, such as loans and financing. Until then, a company of the type you want following a series of requirements that hampered the operation, such as being linked to a financial institution conventional, and does not apply own resources in the provision of credit.
With the regulations, fintechs credit can to form a Company Credit Direct (SCD), or a Society of Loan between Persons (SEP). In the first mode, the fintech can offer credit with financial resources own. In the second, the fintech organizes a platform credit resources are coming from people individuals or companies, as a kind of lending collective or peer-to-peer.
The regulation also allows fintechs of segment providing services of credit analysis, offered insurance and so on.
According to the Central Bank, the regulation was created to stimulate the offerings of credit services in the the digital environment and, thus, to generate a competition with banks and traditional financial. The entity expects that the competition is fierce to make the high rates of interest existing in Brazil loans and financing fall.
The fintechs are reliable?
As a rule, yes. But every business, regardless of the segment, is subject to the risks, therefore, it is necessary to have careful when hiring the services of a fintech — or any other company.
One of care with respect to security. Many fintechs can be more attractive that the banks, for example, cast bureaucratic processes. This is a positive thing, of course, but eventually you can expose the client or the own business the certain problems — when a procedure that checks the legitimacy of the information is discarded, for example.
For this reason, it is important to note which companies are partners of fintech, if the company complies with market standards, if she has complaints on consumer protection agencies (escape from those that have many complaints), and so forth.
It is also essential to know if the company has a policy clear privacy protection, if it invests in information security, if it adopts measures combat fraud, if you have efficient channels of communication with clients, anyway.
It is important to still pay attention in the proposal of the business. If the fintech provides services with prices very low or complete exemption of tariffs, need to make it clear how to get — or, at least, plan to get — the recipe. To the contrary, the company may have serious operational problems or, in extreme cases, flag involvement with illegal activities.
The fintechs are fad or here to stay?
There are some niche markets that follow the style “squib”: explode and then disappear. An example are the sites of collective purchasing: these services have had great popularity back in 2010, but today are reduced to very few players — the sites that do not have closed have been swallowed up by other or have had drastic changes in the business model.
But this does not seem to be the case of fintechs. As it happens in virtually every branch of activity, the companies of the segment can close or be absorbed by larger companies, for example. However,it is unlikely that they rise to the “effect roast”.
This is because, above all, these companies appear in response to a need. The number of people using smartphones and mobile Internet around the world continues to grow. Consequently, the demand for digital services increases: even individuals with little familiarity with technology understand what mobile devices can do,and gradually, they start to take advantage of this potential. And look who this account is not including people who access services online from computers.
Perhaps the greatest evidence that this is a segment that emerged to consolidate comes from the banks: these institutions have realized the impact that these services cause in their operations. There action comes in the form of improvements in the provision of traditional services, in acquisition of fintechs (as in the case of Superdigital which, looking back, was acquired by Santander), or in investments in these firms.
In fact, partnerships seem to be the best way for both sides. The banks still keeping a complex structure and consolidated, while the fintechs cover gaps or create spaces where before there seemed not to be anything.
In the end, it is the consumer who ends up benefiting, not only for having more options services at your disposal, but be able to exercise the power of choice: the younger audience that has more intimacy with the technology, stands out for hesitate least in changing service if you realize that you are being poorly served, or that there are better alternatives.
So, if the traditional financial institutions do not to follow this trend, whether improving services, it is establishing partnerships or absorbing technology — betting on the block chain, for example, are at a great risk of losing relevance.
