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. This week we spoke to Gonzalo Strauss, CEO of Datanomik, who explains the need for open banking in a B2B environment, especially in a crowded market like LatAm’s.
Datanomik is an open finance B2B Fintech platform that enables easy access to financial data from several financial institutions in Latin America. In June 2022, the company launched its Business Gate solution to help organisations in LatAm get access to a financial platform they may not have had before. To further understand how this product could be applicable to businesses throughout the region, we sat down with co-founder and CEO of Datanomik, Gonzalo Strauss.
Can you tell me a bit about the company and your role within it?
I am the CEO and one of the founders at Datanomik, but I feel like the best way for me to describe the company to you, I should first tell you a bit about myself. I started working in the payments space in Uruguay in 2017, as a part-time developer at Astropay, the mother company of the first Uruguayan unicorn, dLocal.
At the time, Astropay was moving millions and millions of dollars per day, throughout LatAm, using extremely old processors. When we speak about LatAm, we are speaking about a continent, not a country, so there are loads of different markets and banks, that all deal with payments in their own way. The strain this put on us – dealing with over 400 different types of bank accounts and roughly 60-80 different types of payment integrations, was immense, so I decided we need to find some alternative solution to these internal problems.
I started researching and understanding open banking and open finance in Europe, in the US, but I didn’t find much about solutions in Uruguay, mainly because of two things: the first, LatAm was just starting to implement open banking and open finance. But secondly, and most importantly for us, open finance and open banking are mostly used in the consumer industry, but rarely used on the business side of things, so there just weren’t that many solutions out there that solved our problems. When we couldn’t find an external solution, we decided to build our own internally. We quickly realised what we were building was not only useful to us, but also to dLocal and any other company having issues with accessing financial information in a standardised, real-time way, and thus came about Datanomik.
How does open finance differ from open banking in LatAm compared to the rest of the world?
I feel like wherever you go around the world, there are still some big uncertainties about what open banking is. The first thing to highlight is that open banking is not a product, technology, or infrastructure. It’s just a concept. Our definition of it is: open banking positions the user to give founders their own banking data. That’s the concept of open banking. So when we say that x player is an open bank, or y is an open banking player, we are saying that they are using the concept of open banking to deliver some service or product, to build some infrastructure.
When we speak about open finance, it’s the same concept, but with a wider scope. Instead of users being the owners of solely banking data, they are also the owners of data from other financial institutions from payment processor companies, brokers, exchanges and any other type of financial institution. When we say that we are the first open finance platform in LatAm, we say that we are the first open finance platform for businesses in LatAm, because as I was saying, most of the open banking players are focused on bringing benefits to the end users.
Datanomik is bringing open banking to the owners of business data, which are the businesses themselves. We’re helping them centralise the view of audits, and all the financial products in a single platform, with an easy and accessible way to view old financial information.
When I speak about the development of open finance, I try to speak in three different terms, trends in development, regulation of infrastructure, and education; of these, you can get different combinations of two of the three.
If you take the case of the US, you see that open banking and open finance are not regulated.Despite this, there are great players in the US, with millions of dollars of in the system and with great education throughout the country. But if you speak to an average American and you ask him, “what’s open banking?” He won’t have a clue about how to answer you, but they will almost definitely be using open banking in some way in their daily life. In terms of the LatAm, I feel like we have to speak in a general way because, again, it’s a continent and open banking is still in its very early stages, even in the counties that are using it. Brazil is the most advanced country in terms of regulation. The infrastructure is also being implemented, but in terms of education, there is still too much to be done in Brazil – for both users and companies to understand the benefits of open banking. Neither fully understand the security concerns, or the differences between open banking and open finance so it just isn’t viable to implement it.
Mexico for example, has been regulated, but not these regulations have not yet been implemented. They have a theoretical definition of open banking, but there is no infrastructure to put the regulations into practice. Colombia is a similar boat too. Truthfully all the countries in LatAm are starting to discuss what defines open banking regulation, but there’s still a long way to go.
Would you say Uruguay is one of the countries looking to create open banking regulations?
In a similar way that dLocal was founded in Uruguay but first implement in Brazil, Datanomik has also launched outside of Uruguay. We’re a really small country and there isn’t a big enough market for us to impact it in a big way. So we are, in a way, forced to go to the outside world. We want our product to be proven in larger markets throughout LatAm before being brought back to the founding country.
Is Datanomik tailored to the LatAm region or could it be applicable worldwide?
It’s not that we are tailoring our product to LatAm, but the problem is specific to it. So take the example of companies that need to operate in three or four countries, take Brazil, Colombia, Mexico and Argentina. They are at least operating five different currencies, with five different banks with multiple bank accounts. So SME’s may be dealing with more than 10 sources of financial information spread across different countries. This is very characteristic being of LatAm because if you go to the US, a country with one type of currency, or if you go to Europe, yes Europe is a continent but the European Union consolidates most of the economic efforts. This is why trying to get a hold of data in a consolidated way is so difficult and in a way, exclusive, to LatAm countries. So I am not saying that we are not going to Europe or the US, but the real pain points lie in the emerging markets. So instead of Europe, our next step after will likely be expanding to Africa, or Asia, where they are much more underdeveloped in terms of open banking infrastructure, and in terms of financial inclusion and financial visibility.
What is the Business Gate offering?
Many other open banking players are only API first companies. We also offer APIs but to the traditional companies and non-technological companies. We are offering a no-code platform that allows any financial team to link all their bank accounts and data to it, letting them see all their balances, transactions, consolidation, currencies and insights into everything and anything related to their financial position and financial overview e.g their cash flow evolution, and their net positions.
Why are we doing this? Because, as opposed to other open banking players, we are targeting not only tech startups and tech companies, but also other traditional and multinational companies that historically lacked technology, digital adoption and financial processes. We’re trying to tie in all these different stakeholders that don’t want or need technology, as they didn’t have a base infrastructure to begin with. This is why we need to offer them our platform, which is as easy to use as using Netflix. They just need to sign up, log in and connect their bank accounts to start using other financial data, interacting with it the way they want.
Do you think the challenges you will face from expanding to other countries in LatAm will be exclusive to you?
The first challenge for us, is in terms of regulation. when we say we’re expanding to other markets, we need to ensure that we are compliant with that market’s regulation and in turn, find a way to adapt our technology and product to be compliant within that market. So if we go to Brazil, we need to be regulated by the Central Bank of Brazil and comply with some specifications and requirements in order to be interconnected with the different banks. If we go to Mexico, we need to understand how we can comply with the Mexican ecosystem and banking infrastructure. This goes for all the countries in LatAm – but we not only need to be compliant, we also need to standardise information because one of our core values is getting all the information in one single universal language and format. For that to happen, we really need to understand the value of data in Argentina, Colombia, Mexico or Brazil and beyond.
Generally speaking, there is a real challenge for any startup that wants to jump from one country to another, mostly because we simply underestimate the difficulties of moving to another country. You’re going into a totally different culture with different ideas, populations, laws and different ways these pieces interact with each other within the ecosystem, not to mention the difficulty of speaking different languages. That’s why there is a very big challenge.
What does the future hold for Datanomiks?
The Datanomik’s mission is to help companies get easy access to financial information in our standardised, automatic, real time way. It may look simple, but it’s really challenging on the on the backend. LatAm will be a challenge for us as we want to fully cover the continent. We are already operating in Brazil and Uruguay, and just starting our operations in Colombia and Argentina. We are trying to enter the Mexican market too and hope to do so in the next three months. We are already speaking with other partners in countries like Chile and Peru, and hope to expand our operations there soon.
For now, we are solely focusing on LatAm, because if we can tackle the challenge here, it would be a huge win. And we understand that if we do, we would be helping 600 million people many of whom are unbanked, while also helping the businesses get easy access to information on the entire continent. As we are business-focused, this would massively help the B2B economy in the region.
In the mid-long term, we may be expanding to Africa because of the similarities in the challenges faced there. But it’s not something that we’re thinking about now. Right now, our main focus is on solving specific long-term problems in LatAm and then in the future… We’ll see.
I want to highlight the importance of open banking and open finance for businesses, especially in LatAm. Any company right now needs some kind of process to be aligned with their treasury, and we’re thinking about traditional companies – any type of size from construction companies, travel agencies, to technological companies, and ultimately any other type of industry that may be applying these kinds of problems. Our product isn’t only for financial services, but actually for any company. So we’re not solving these paying to financial related services, but actually to any company in LatAm. That’s why it’s really important for us to use and deliver the open banking Business Gate platform to them.