Em Conversa looks to uncover the secrets in Latin America (LatAm) that have caused the fintech market to boom, from being worth less than $50million in 2016, to $2.1billion in 2022. Marcelo Bentivoglio, co-founder and chief strategy officer at QI Tech, spoke to The Fintech Times about the growing need for as a service providers in LatAm and how they can help evolve the market.
QI Tech is a licensed banking technology company offering automated financial tools. It also meets the needs of a highly regulated banking environment. Its main mission is to develop a digital and innovative way to invest, manage credit assets and raise debt.
Additionally, it believes that the fintech market needs solutions that facilitate the entry and management of banking system. This resulted in it creating a platform with full stack Bank-as-a-Service APIs. In turn, this made obtaining and offering banking services a simpler and more accessible process.
Comparing the Brazilian market to the rest of the region and the world, Bentivoglio broke down the challenges the technology faces there, in addition to why the market is so exciting:
Can you tell me more about the company and your role within it?
QI Tech is a fintech company that holds a bank license (SCD) in Brazil. It also offers banking and lending ‘as a service’ to any company. This could be a fintech, incumbent, bank or any financial service organisation. You can think of QI being the ‘AWS for banking’. We provide a wide range of features that allows our customers to build an ‘end to end’ banking experience.
We start serving our customers with a KYC ‘as a service’ platform. The first product is an onboarding system that is integrated with all the data providers in Brazil. QI’s customers can easily integrate with bureaus and government databases using one simple API. Once the onboarding process starts, QI offers many different features to better understand the data and the customer.
For example, QI offers a Device Scan SDK and Antifraud intelligence. With both in action, QI’s customers can build trust around the information provided by the end customer and can offer better products. Finally, QI also offers a credit scoring engine connected to open finance data from end customers and other data points only accessible to financial institutions in Brazil.
After onboarding the end customer, QI customers can easily offer (i) checking accounts with payments capabilities, (ii) lending products in many verticals, student loan, auto loan, BNPL, home equity, payroll loan, etc., and (iii) credit cards, both pre-paid or post-paid.
What are some fintech trends in Brazil? How do they compare to the rest of the region/world?
One of the strongest trends in Brazil is providing access to cross-border products. Many fintech and banks are offering deposits in USD, for example. The ultimate goal is to provide a full suite of banking and investment products in one place, so customers can have a global account with deposits in many currencies and access to invest those deposits in products not easily available for Brazilians by local players.
This trend started with the traveller’s niche. Travellers in Brazil used to buy physical cash for their travels and that happened because to use your national credit card in other countries, travellers faced a 6.38 per cent tax in each transaction. However, it is way more convenient to travel with only your card in your pocket. As soon as some options hit the market, many customers started using them for travelling. It is possible that we are going to see a global offering with deposits and also investments.
What is QI doing to help improve the as a service sector in Brazil and LatAm?
QI is leading the way as the ‘bank’ as a service in Brazil. Many BaaS providers only focus on accounts, payments, and other money-transferring capabilities but QI offers a true banking experience, with loans, structured finance, and other complex financial instruments ‘as a service’.
The boom of neobanks created a new dynamic in the market, nowadays, end customers rarely pay for banking products, which is great for the population and for competition. However, now we have dozens of digital wallets very limited in terms of financial instruments. QI is helping the market evolve from ‘only payments’ to true banking.
How does the Brazilian as a service sector compare to that of the rest of the region/world?
Brazil is very privileged to have a pro-market Central Bank, many innovations in the market happened because of the agenda proposed by the regulator. At QI, we follow very closely the changes promoted by the BCB (Brazilian Central Bank) and we usually deliver the innovation faster than any other company to the market.
That was the case for PIX, for example. QI was the first ‘as a service’ company to deliver loans integrated with PIX 24/7. During the last Carnival holiday, QI’s customers originated $16million in 73,000 unique loans. Another important factor in Brazil in the well-developed capital markets. This is important to have a good dynamic between equity money and debt money. Most fintechs depend on debt money availability to grow their credit operations and having access to investors can boost the operation.
What are some unique challenges associated with the Brazilian as a service sector?
The biggest challenge is that every company needs to be able to keep up with the constant evolution in the product offering and customer experience. Also, fintech is default local not default global as it requires specialisation to local regulation. Banking is needed everywhere but the market is saturated with ‘as a service’ limited to transactions. The challenge ahead is to build a multi-country ‘as a service’ around complex financial instruments.
Plans for the future
As mentioned before, to really grow a lending operation, fintechs and any other company must have access to funding, and that is the next chapter for QI Tech in Brazil. On the 27th of December 2022, QI was approved by the BCB to hold a DTVM license. With that license, QI will offer the services of structuring, administration, and custody of investment funds.
In Brazil, there is a class of funds named FIDC which is one of the best vehicles for funding credit operations. Almost 70 per cent of current QI customers have a FIDC and they are currently being served by traditional players lacking technology and agility. QI is building a tech-first DTVM to serve credit funds and help customers scale.
We are building capabilities to empower any company to offer financial services. Today, people still go back to traditional banks to find offers for more complex financial operations, such as financing a new home. At QI, we believe that soon we will see more complex products being offered by our day to day companies, to the point that our financial experience will be handled by our preferred apps and banks will be in only in the back scene.