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. Thiago Iglesias, head of portolio at Torq, the open innovation hub and corporate venture capital of the Brazilian financial software giant Sinqia spoke to The Fintech Times about how the Brazilian fintech market can be accelerated.
In March 2023, Torq launched the Fintech Innovation Challenge Crossborder Payment, an initiative that aims to bring to Brazil technological solutions of international payments developed by startups from London and its surroundings. When it comes to fintech innovation the UK and Brazil are two peas in the same pod – there is great synergy between the two countries. You only need to look as far as open banking’s development to see how they are working in tandem.
Looking to get a greater understanding of how capital is being invested in fintech in the LatAm giant and how the sector’s development is being accelerated, we sat down with Thiago Iglesias, head of portolio at Torq. With over 10 years of experience in fintech, Iglesias analysed fintech trends in Brazil.
Can you tell me more about the company and your role within it?
Torq is the open innovation hub and corporate venture capital of Sinqia, a technology company in the Brazilian financial market. We provide technology to banks, funds, pensions, consortiums and digital service lines, among other areas. Torq works with open innovation, focusing on building an ecosystem that generates innovation beyond Sinqia. We also have a Corporate Venture Capital initiative that invests in startups linked to the future of financial services.
My job is to look at initiatives that drive innovation within the company, but also connecting with external partners. At Torq, I’m the head of the portfolio, responsible for managing the partnerships with the startups that we invest in. We have more than 100 invested startups, including direct investment and indirect investment via partner funds, accelerators and other players.
What are some fintech innovation trends we’re seeing in Brazil?
Brazil’s moment is different from the stage in which other global markets find themselves. Currently, the conversation about open finance and how to bring this technology to our country is at an all-time high. We are understanding how to enable easier access and greater ownership of the user’s data, generating value for the customer in the process. We are about to launch an initiative for the pension market where it will be possible to allow greater portability of pension contracts via open finance.
There are other trends too. We are starting to see initiatives related to blockchain and decentralised finance, which seek to improve the efficiency of technologies used in the back office of the financial sector.
The idea is to bring efficiency to the national financial logic systems. The Central Bank itself has Real Digital, which introduces blockchain and other technologies that seek to improve the traffic and navigation of money in the Brazilian digital environment. Access to credit is also a complex issue in the country, so credit fintechs are always on the rise – there are many opportunities in this sector.
What is Torq doing to improve innovation in Brazil and LatAm?
Financial investment is an important point. We are investing in startups that bring new technologies to the region. But, more than that, we are working with open innovation with these startups. The connection of these companies with Sinqia, the largest technology player in the country, provides huge access to the Brazilian financial market, often directly to the customer.
We have a huge customer base, more than 700 players, and this direct connection facilitates the development and improvement of technologies and products. We have several events happening across the country where we share knowledge and create connections. In addition to São Paulo, where most innovation initiatives are concentrated, we have already held events in Recife, Florianópolis, Belo Horizonte, Curitiba and, this year, we have events planned for three other cities.
How do innovation trends in Brazil compare to that of the rest of the world?
Brazil is a little behind considering the main innovation and technology players in the world. There are many technologies that we still have to develop, but there are other areas, such as the agro sector, where there is a lot of Brazilian investment, which encourages growth and the birth of new startups that promote new technologies to these sectors.
The financial market, however, is different. As each country has its own rules, it is difficult for startups to navigate between countries. The Brazilian payment method Pix (instant payment system), for example, brought a big technological innovation, but ended up hindering many startups that were developing solutions for this problem.
Today, we are already looking at an International Pix, so we want to anticipate this global movement that already exists in open finance and open banking. We envision a future in the financial where transactions take place more fluidly between different countries.
There is also a strong investment in the area of services, with startups searching for solutions for low-income population on how to provide access not only to the capital, but to a more dignified life. Education is also a strong sector in the country, a lot of edtechs are developing plans focused on this public. This is a Brazilian differential.
What are some unique challenges associated with the region/country in terms of innovation?
An inherent challenge in Brazil, regardless of innovation or not, is the size of the country. We are talking about a continental country, with very different regions and audiences. Specifically regarding technology, access to good and stable internet can be problematic. Often, products that make a lot of sense for a given location end up being based on technologies that do not work in the region, especially when we are talking about the countryside.
Bureaucracy in the country is also complicated, even if it has improved a lot in recent times. The tax part is also a big challenge, there are many taxes and an overly complex logic behind them. Fortunately, there are bills that are working to simplify these processes.
The level of education is also another challenge. We are a country with a suboptimal level of education, so the conversation about technology and innovation doesn’t always reach the people who would benefit from these ideas.
Plans for the future (roadmap and growth plan)
We have already consolidated the strategy of maximising value for Sinqia with our portfolio of startups and open innovation initiatives, enabling the generation of revenue for the company itself and for its customers. Now, our challenge is to bring the innovation to the financial sector as a whole The objective is to generate value and create synergy for companies that permeate or relate to the financial market.
Not depending so much on Sinqia, but relying on other partners and players that enable different projects and visions for the market. The secret is to generate value not only for the startups in our portfolio, but for ecosystem partners as well.
Final thoughts
We are experiencing a complex moment in the market. We have seen low investment numbers compared to what we had in previous years, both in venture capture and in startups own projects. The current focus of the market is on efficiency, on cleaning up the house and creating a scenario of less cash burn and faster breakevens, which would facilitate the process of investment rounds. This could be healthy for the market, changing the landscape of stretched valuations and focusing on future profit and return for the investor.
