Open Finance trends across Latin America in 2021

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A new report aims to better understand how the Open Finance ecosystem is evolving in Latin America. With this goal in mind, it looks at the trends that will impact the adoption of these new models in the region during 2021, focusing mainly on Mexico and Brazil, through interviews with industry experts and a survey sent to fintech professionals.

The report also covers investment trends in key FinTech verticals, the emergence of new players and models like embedded finance and marketplace banking, regulation, partnerships, top
deals, and more.

It explores six key trends to expect this year and analyses new regulations, players, and models like embedded finance.

In order to gather relevant insights around these topics, Belvo surveyed 150 professionals in the Latin American FinTech sector. They also interviewed nine experts, including representatives from Visa and Mastercard, Mexico’s CNBV, and FinTechs like Ualá and Mobills.

“By allowing the flow of financial data from banking and alternative sources to be easily and securely shared with others –and by generating insights on top of that data–, it is possible tobuild a more inclusive ecosystem,” explains Pablo Viguera, Co-Founder and Co-CEO of Belvo. One where users can access the services they truly need at the best possible rates, and with the freedom to choose from a wider range of possibilities.

Speeding up digital adoption 

The results of the report point at an accelerated demand for digital financial services in Latin America. The need for social distance has pushed millions of users to shop, pay bills, or access bank accounts digitally for the first time. And experts believe that these new digital habits will remain: 96.4 {3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} think that covid-19 will increase the digitalization of financial services. Almost half of them (47.3 {3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}) think that payment providers will be the more affected segment of the industry.

Open Finance Trends in Latin America Report 2021

As a result of this increased demand, most professionals (84.3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}) believe that the adoption of Open Finance models will grow in 2021. This will be driven by a more favourable regulatory environment (particularly in Mexico and Brazil) and more visibility about its benefits among end-users and companies.

And while 38.4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} consider that regulation remains the biggest challenge, 90.2{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} think that companies should start preparing for this scenario. Technology providers like Open Finance API platforms will help build the necessary infrastructures to make it a reality.

A maturing ecosystem 

Emerging non-traditional players –like FinTechs, big techs, and gig economy platforms–, will increasingly invest in this new ecosystem. These players will help consolidate the popularity of these new business models. Either by forging alliances with financial institutions or by building their ecosystems with embedded financial services.

The growing maturity of the FinTech ecosystem during 2021 will also lead to new and more sophisticated use cases.

Beyond the access to data, companies will be able to add an extra layer of intelligence to their businesses thanks to data enrichment solutions. They will also start offering instant payment solutions through APIs directly within their apps.

Lending companies will benefit the most from these new models, according to 40{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of professionals. Followed by firms specialized in credit scoring (22.3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}) and personal finance management tools (18.8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}).

Alternative data sources will increase financial inclusion 

Access to enriched data is the most relevant benefit of implementing Open Finance models, according to 32.1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of professionals. And a majority believe that using new alternative sources of data will help create better financial products in 2021.

Alternative-data-Open-Finance-Trends-Latin-America-2021-Belvo

Experts agree that this will lead to the development of more tailored and relevant financial products. And that these will reach people that are unbanked or underserved by traditional entities.

Gig economy platforms will become increasingly relevant to build more inclusive financial products.

These platforms have seen a surge in the employment of independent workers to fuel increasing demand.

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