Recently, we’ve seen a great growth in the offer of services and products for the financial market. Most of these services are related to some Fintech company and not to big banks, as was common a few years ago. These companies are investing heavily and offering innovative services, betting on technology and customer focus as a way to revolutionize the financial sector.
What are Fintech companies and what do they do?
Fintech is how technology companies focused on the financial market are called. The term came from the union of the words Financial and Technology and usually refers to startup companies that offer some innovative financial service or an enhancement of an existing financial service. These companies aim to provide various services, such as credit cards, payments, investments, loans and others. They are initially supported by investors, who inject large amounts of resources to implement these services.
Fintech companies bet on the use of modern technologies to develop their services, such as digital wallets, blockchain, cryptocurrency among others. Most of these services are available only on digital platforms and there is no physical space to serve customers. The whole process is done through websites or smartphone apps. Customer service is also provided through call centers or chatbots for more complex troubleshooting that cannot be resolved through applications. In essence, each user must have a digital wallet linked to a credit card in order to perform their financial transactions.
Among the services provided, we can highlight some:
- Money transfers
Allows users to transfer money between their virtual wallets and to accounts in traditional institutions;
- Payments at establishments
Some apps have partnerships with establishments, allowing you to pay bills from their location directly through the app. Another feature is payment through QR Code;
- Bill payments (slips)
Allows payment of bills through bank slips. In this case, the virtual wallet credit is used to pay a bank slip through a net clearing process;
They function as an investment portfolio of a bank;
Allows cash withdrawal of the credit in a digital wallet. At the moment, as most of these companies do not have a self-service teller structure, the services are provided through third parties such as the 24 Hour Bank network.
It’s common to see clients using some of these services for the purpose of earning points in credit card reward programs. Since most of the credit in the wallet originates from a credit card, the centralization of bill payment through digital wallets generates high movement on the card linked to it.
Competition with traditional institutions
Among the reasons why more people and companies are choosing fintech companies services, there are:
- Agility in the processes;
- Less bureaucracy;
- Exemption or small fees for providing service.
According to research conducted by the Locomotiva Institute, there are around 45 million Brazilians who do not have a bank account. Although the vast majority of these people are from lower social classes and cite their lack of money as a reason for not having a bank account, there is also another profile of people without bank accounts identified. This profile includes people who have not had a good experience as bank customers, small business owners, salespeople and street vendors, that is, people who need banking services, but, for different reasons, prefer not to have an account with these institutions.
The profile of the people identified in the survey represents potential customers of fintech companies. However, all sorts of profiles have moved to the services provided by them, such as people and small businesses looking to evade the bureaucracy, queues and high fees of conventional institutions.
Traditional banks have realized that many other fintech companies are emerging, offering a wide range of services and attracting more and more customers. Aware of this, banks are beginning to adapt to provide a new platforms to compete with these companies. Proof of this are banks like Itaú and Bradesco, that have already opened their own digital banks and smaller banks acting as investors in fintechs companies.
In addition to banks, the growth of fintech companies also seems to be felt by credit card companies that, just like banks, are already starting to move to get their share in this market. For example, Cielo has just launched Cielo Pay, its digital services platform.
But not everything is perfect
Even with the offer of attractive services, there are problems related to joining fintech companies. A search on the Reclame Aqui website shows numerous complaints against these companies and, although most complaints were answered, it is possible to identify that the problems are usually related to transaction reversals or the time to clear slips (cases in which the slip was paid on time, but did not enter bank clearing process).
Fintech companies and their main services
We can categorize companies according to the services they provide:
- Payment accounts
They are digital wallets used primarily for payment of website purchases or for use of contactless functionality (also known as Near Field Communication or NFC) of mobile devices. Here, the main players are big names that can’t even be considered fintech companies:
- Apple Pay
- Ant Financial (Alibaba affiliate responsible for AliPay);
- Google Pay;
- Bank Services / Credit Cards
They offer various banking services. Some national fintech companies:
- C6 Bank (will also act with toll gate tags);
- Banco Inter
- Neon Payments;
Bill payments, inter-account transference services:
- MercadoPago (linked to Mercado Livre);
What about the future?
With more players getting into this new market niche, such as major financial institutions and credit card operators, what can be expected is the provision of many services that cater to all types of consumers. This offer will provide a competition for the market, where consumers’ satisfaction for the service provided and its cost will be decisive when choosing their supplier. What we can conclude is that fintech companies have arrived to make a revolution in the financial market, causing the big financial institutions to rethink their business model.