‍Due to the sudden growth of Fintech platforms in Latin America, banks have had to rethink their roles and a new position in the market with regard to the rising players. Instead of viewing them as competition, banks are starting to partner with Fintechs, providing more personalized services and reaching more customers.

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Due to their technological capacity and flexibility to find new opportunities, Fintech companies have grown to unbeatable figures in recent years in LATAM, raising around USD 525 million in the first half of 2020, according to a report from the Latam Fintech Hub. In addition, the density of the Latin American unbanked population constitutes for these companies a massive economic opportunity that has yet to be exploited by traditional institutions.

In addition to this, in 2020, the Pandemic has served as an accelerator of this growth. Due to lockdowns all over LATAM, consumers welcomed new online payment methods beyond the established cash practices.

If you can't control them, join them

Recently, banks have learned that it is beneficial to cooperate with Fintechs to attain more growth. Unlike private or public banking, Fintech companies have smaller structures that allow them to be more flexible in the face of changing political and economic situations, as is the case in Latin American countries. In addition, testing of new technologies and protocols happens with greater speed. Therefore, it makes sense for larger institutions to rely on Fintechs for these aspects instead of spending money and time testing costly and difficult-to-implement systems.

Another reason why banks benefit from allying with Fintech companies is that the latter has greater experience in creating new financial products and finding previously unexploited segments. From their conception, these companies have been driven by innovation. Therefore, many traditional institutions join Fintechs to attain their know-how in the search for new opportunities, hopefully avoiding large losses of money that could result if banks alone would embark on testing.

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In this sense, alternative credit scoring is one of many examples where banks can take advantage of Fintechs' know-how to reach new consumers. In addition, new data enriched technologies have made Fintechs pioneers in the development of credit products in Latin American markets, where cash transactions are strong.

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Banks can use these technological advantages to carry out more precise customer retention actions. New data processing models have allowed Fintech companies to diversify credit, giving them the ability to offer personalized products for each type of client. Thanks to alternative data and machine learning, fintech companies can obtain a more complete credit profile of their clients and know their individual needs.
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Beyond increasing the client portfolio and diversifying products, partnerships with Fintech companies also help banks solve specific problems related to the speed of loan processes. In this way, traditional financial organizations can leverage on a state-of-the-art, secure network capable of managing long tasks quickly and effortlessly.

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So the question is, why build everything from scratch when there are already financial players in Latin America capable of meeting the new market demands? It is not necessary to invent anything when it already exists, and it is best to join those who have the experience and knowledge to do it better.

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In conclusion, it is not about stealing market share but about building a new paradigm for everyone. Furthermore, partnerships between traditional banks and Fintechs show the commitment to continue improving the consumer experience using the best resources and knowledge that the institutions can provide.

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