Are more product combinations and alliances on the horizon?
By Tory Jackson, Head of Business Development and Strategy, Latin America, Galileo
By now, everyone is familiar with Mexico’s impressive fintech figures: approximately 400 companies with more than two-thirds reporting some type of financing, one of the latest being Oyster Financial’s historic seed round of $14 million. But, what stage of the Mexican fintech story are we in, and which examples and indicators will best inform the next chapter?
Many fintechs, many questions
Fintech in our region is a relatively new phenomenon with the majority of companies still in their infancy. This means we lack things like clear categorizations and reporting transparency to help us make more concrete deductions about where we stand and where we’re going.
A recent study by Korefusion made an admirable effort to address these and other challenges, providing important insights and reinforcing my belief that Mexico’s fintech story is still in its early chapters.
Payments lead the way
According to the report, three sectors receive more than 95 percent of all reported fintech investment in Latin America with payments leading the way at 50.5 percent, followed by lending with 24.5 percent, and digital banks with 21.6 percent.
As Jan Smith, KoreFusion co-founder notes, “The maturity of emerging fintechs and their capacity to develop alliances and capture a majority of investments is key for them to achieve their goals.”
If he’s right about alliances, then there’s a good chance that platform migrations and consolidations will become important topics of discussion in the coming months and years.
Choices with lasting impact
Here’s where the importance of selecting the right platform and the value of having a direct relationship with your payment processor comes clearly into view.
For instance, some fintech operations that previously focused on prepaid solutions are removing the card entirely and going purely virtual or pivoting to debit- or credit-based offerings. That sounds great because it signals that fintechs are evolving and diversifying. But, what if your processor can’t do that or you have to go through a third party to have those discussions?
Or, what happens when consumer lending fintechs want to get together with payroll fintechs? Sounds like a natural fit, right? Knowing how much someone gets paid is an excellent way to evaluate creditworthiness. However, companies in situations like these will have chosen their existing technologies and partners based on very different considerations than the ones in front of them today.
Merging or migrating any kind of financial service has historically been the thing of nightmares, fraught with concerns about interruptions to frontline services and costly overruns. In some cases, these situations may be unavoidable or rationalized as part of natural growing pains, but it doesn’t necessarily have to be that way. One never knows what exact challenges the next chapter in any business will bring, but in choosing technologies and partners, it often pays to anticipate which are better suited to deal with future needs and which are not.
Choosing a partner like Galileo enables companies to focus on where their business is today, while being prepared for where they want to take their business tomorrow. These solutions include options to suit varying business needs, providing fully customizable payment programs that support as much of the payment back office as each client needs, for financial institutions, as well as non-financial companies that are looking for simple ways to create their own credit or debit card programs.