The opportunities available across Latin America are clear, but firms should respect the region’s fragmentation and recognise the differing needs from country to country, says NovoPayment.
Here, Anabel Perez, CEO of NovoPayment, the Banking as a Service (BaaS) provider for the Americas, discusses her experience of implementing digital financial products in LatAm – and her view on dealing with the challenges presented by the fragmentation of the region.
In the highly fragmented Latin American financial ecosystem, the opportunity for interoperable financial infrastructure solutions is obvious. What’s less obvious, however, are the challenges of creating a transnational framework that serves the unique regulatory needs of individual countries.
Too often, BaaS companies and other institutions have made the mistake of thinking there’s a viable ‘one size fits all’ service that can cater to an entire region with a single formula. To deliver financial solutions that empower Latin America, we must address the region’s fragmentation with due diligence and recognise not only divergent demands from each country, but also the diverse needs of the banks and their respective stakeholders.
When I founded NovoPayment, I saw an opportunity to transform how financial services and payments were delivered across the Americas. Headquartered in Miami with offices in Mexico, Colombia, Peru, and Ecuador, we provide a multi-currency API cloud-based platform that powers digital banking, payment infrastructure and card solutions to clients throughout 15 markets in Latin America and the US.
I’ve seen firsthand the critical need for seamless collaboration, as it drives value for each player and gives businesses of any size room to innovate as they adapt to an evolving financial ecosystem.
Large banks in emerging markets must begin with a vetted, reliable foundation
When working with financial service providers, our process is to prioritise and invest in the highest industry standards and regulatory compliance, extending that to our financial clients and partners. Practical compliance is vital, and by that, I do not mean just passing exams; we’re living and breathing the regulations throughout all our initiatives.
These efforts benefit banks, fintechs and their respective ecosystem partners as they design and build solutions that give their end customers the power to choose how they interact with providers in a more contextually practical way. The priority, however, is ultimately the consumer because they increasingly want a say in how they make transactions and move money. The challenge is that these service providers, businesses, and consumers want to interact seamlessly, but their countries’ respective realities may not be as compatible with this expectation as they are.
We’re closely paying attention to specific market dynamics and how regulations are evolving. Consumers want flexibility in how they pay merchants, whether physical or digital. The latter continues to see rapid innovation, and consumers want the power of choice in their day-to-day financial lives. Preferences range from remote banking to tap-to-phone payments, QR codes, or a combination of several transaction options. In many ways, our clients are the real heroes for designing customer journeys that can offer that flexibility in an accessible way.
But to get to a point where they can build, service providers must start with a robust foundation and service offering that aligns with regulatory standards and technical components to digitise and streamline those innovative journeys.
Small businesses need the support of financial infrastructure to scale
Financial infrastructure is all about supporting banks that support people, and in my time working with domestic and international markets, we’ve developed a process to both discern credibility and enable banks to keep innovating. The first question we address is how we ensure clients maintain growth and improve margins while following the required standards at a localised level.
Through the proper approach, we can support our customers’ visions and execution of their respective strategies. We provide a platform for solving our clients’ problems and retrofitting old processes with emerging technologies. By doing so, we’ve helped large companies scale up and expand in addition to empowering small businesses and mom-and-pop shops to modernise their transactions.
NovoPayment works with one of the largest financial networks for mom-and-pop shops in Mexico, which we helped migrate from analogue to digital so that they could route domestic transactions from different banks that facilitate services to underserved areas. Their previous model was outdated, with a highly fragmented type of integration and disjointed interactions within the communities that they serve. We were able to help them migrate from that to a more efficient enablement that brings them visibility, reduces their costs of operation, accelerates access to data, and ultimately streamlines their money flow. This financial network is exemplary of what our industry should strive toward: bringing innovation to the small businesses and communities who want to connect with a broader market.
Latin America’s financial fragmentation requires localised approaches. The result is that large and mid-sized banks will streamline their operations, and small businesses can access financial products that help them provide services to their customers. Building infrastructure with solid regulatory foundations and adapting to localised business needs are cornerstones of seamless financial interaction, and only then can we successfully connect communities, businesses, and people.