United States , Mexico and Brazil
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Progress in open banking fueling spread of tech multilatinas

Bnamericas Published: Wednesday, August 31, 2022
Progress in open banking fueling spread of tech multilatinas

Progress in regulations or legislative discussions in Latin America to allow greater integration and transparency of banking data – so-called open banking, or open finance – is driving the international expansions of regional tech companies that specialize in these areas.

As more countries regulate and authorize open banking, companies that were previously dedicated to a single market are finding opportunities to expand and diversify their customer bases. The same goes for new electronic payment regulations.

For example, Sensedia, a Brazilian application programming interface (API) management platform focused on the financial sector, has just launched operations in Mexico, seeking opportunities in open banking and payments.

“We started the process in Mexico about six months ago with prospecting activities. We already have two contracts, new contracts, with companies operating in Mexico, one of them an international insurance company headquartered in Germany,” Sensedia’s Latin America business director, Alexandre Gomes, told BNamericas.

Sensedia's focus on Mexico is on banking, means of payment, insurance and retail. The company also launched an operation in the US this year.

The firm said it grew 70% last year, which Gomes attributed to the growth of e-commerce, open banking and marketplace platforms, as well as electronic payments and digital wallets, all segments that rely on the use of APIs to operate.

“At least half of our growth is linked to the verticalization of specific 'opens' [open banking, open insurance, open finance]. I call it 'open everything',” he said.

In 2021, the firm received a 120mn-real (US$23.4mn) contribution from Riverwood Capital and 80% of the proceeds will go to global expansion, Marcílio Oliveira, Sensedia’s co-founder & head of growth, told BNamericas.

The company reports having around 200 clients for all its markets, 30 of which are exclusively related to open banking in Brazil, according to Gomes.

They include the banks Original and BMG in Brazil, pioneers in the integration of APIs for payment systems in the country. The latter carried out the first API implementation for the Brazilian instant payment system PIX, using the Sensedia platform, according to the executives.

Executives see Brazil and Colombia as leading in open banking maturity, with Mexico coming next, “in phases”. Gomes also said Brazil was the first country to regulate open insurance. 

“The other countries all want to have standard open banking architecture. They need to have a compatible technology at least,” said the executive.

Sensedia has been supporting companies with technical solutions since 2007, and its products and services include an API Management Platform, Adaptive Governance and Cloud Connectors, among others.

The company has offices in the UK, Ireland, Germany, Spain, Switzerland, Lithuania, Peru, Brazil, and now Mexico and the US.

While competing with multi-product global players such as Google, IBM, Microsoft, Red Hat, Software AG, TIBCO and Axway, among others, the group's end goal is to have up to 30% of the "modern application platform" market, according to Gomes.

PROMETEO

Another API company making a move to expand internationally in the wake of advances in open banking is Uruguayan firm Prometeo, which claims to be the largest open banking platform in Latin America led by a woman.

Earlier this month, the company made available an account-to-account (A2A) payment solution across Latin America that was already available in Colombia, Peru and Uruguay. Prometeo plans to open an office in Mexico by the end of the year. 

“Prometeo's founding team is Uruguayan and the first APIs were developed in that country, so that’s where we have most experience in infrastructure development. Something similar has happened to us with Peru, which is our strongest market and where we’ve had more demand for this product,” Prometeo’s founder and co-CEO Ximena Alemán told BNamericas.

“What happens with Colombia is that the regulatory framework for payment initiation was recently launched and it seemed strategic to us to be the first to make this solution available in that market. We also have organic demand from customers in all markets who are already testing our solution," she added.

The payment solution allows Prometeo customers to integrate bank account payments into their digital channels through the Prometeo platform. 

According to Alemán, payment infrastructure "is the natural next step for open banking in the region."

Prometeo's API platform hosts more than 40 financial institutions and over 110 APIs in 10 Latin American countries.

MARKET

The largest financial market in the region, Brazil, is also at the forefront of open banking regulation in terms of the scope and complexity of its system.

It is followed by Mexico, among the first to implement open banking regulations in the region. Colombia, Chile and Argentina are either in early-stage talks or have submitted regulatory proposals.

Globally, open banking is estimated to swell to a market worth around US$43.1bn in 2026, according to Allied Market Research. Data platform Platformable identified 1,578 banking platforms making APIs available as of the end of Q2, which was year-on-year growth of 8%.

According to Platformable, 80 countries had open banking regulations in place as of end-June, while 75 were either implementing open banking rules or close to doing so.

In Brazil, a study by Serasa Experian in April estimated that open banking has the potential to inject 760bn reais in credit into the economy within 10 years, of which 461bn would be for individuals. In five years, the amount available for individuals would be 94bn reais.

In Brazil, participation in the data-sharing ecosystem is restricted to companies approved by the central bank and they must provide APIs dedicated to data-sharing.

“As the system matures, its dynamics become more natural and its benefits more well-known, the trend is for the access of institutions to open finance and open insurance to grow, as well as the number of users consenting to data-sharing,” said Lorain Pazzetto, head of open finance at Grupo FCamara, a consultancy group for digital transformation focused on e-commerce and finance.

In July, FCamara raised 100mn reais in convertible credit from BTG Pactual to make acquisitions and internationalize the operation. The company is targeting revenues of 500mn reais in 2022

The company operates in Portugal, Mexico and the US, in addition to Brazil, and plans to enter Colombia and the UK in the coming months.

Last week, Mexico-based open banking/finance API platform Belvo received an undisclosed investment from Citi Ventures, Citi’s venture capital investing group, adding to US$43m previously raised in Series A rounds. The proceeds will go to product enhancement and expansion.

Founded in 2019, Belvo claims to provide connectivity to over 60 financial institutions through its API platform. 

It also says it works with over 150 customers, including Citibanamex, the second largest bank in Mexico and part of the Citi Group, as well as with financial institutions and fintechs in Mexico, Brazil and Colombia such as Tribanco, Rappi, Mobills and MercadoLibre.

 

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