Open Bank helps Latin America fintech startups to succeed

The practice of open banking, which enables third-party financial service providers access to users' financial data from banks via APIs, is the driving force behind these and other digital financial services

FREMONT, CA: People in Europe, the United States, and parts of Asia can apply for credit online or obtain customized advice on how to improve their credit scores. The practice of open banking, which enables third-party financial service providers access to users' financial data from banks via APIs, is the driving force behind these and other digital financial services. Open banking is forcing banks to become more transparent, efficient, and adaptable to financial technology innovation, and it is proving to be the most revolutionary technology revolution in banking since it went online 30 years ago.

While consumers in Europe and the United States may take open banking-enabled fintech products for granted, this is not the situation in Latin America. LatAm's economy has traditionally been reliant on cash, with up to 85 percent of all transactions conducted in cash and nearly half of the population unbanked. However, for a variety of reasons, this position is set to change. First, LatAm customers have a high desire for digital transaction experiences, as proven by the fact that LatAm is the world's fastest expanding area for mobile ecommerce. Second, the Latin American middle class has increased by more than 50 percent in the last decade, which, when paired with a high smartphone adoption rate of more than 60 percent, has boosted demand for fintech products.

This is an opportunity that both companies and investors are grasping. From 2013 to 2019, the number of LatAm fintech venture capital agreements increased by 5.5 times, while the number of fintech businesses in the region increased from a handful to over 1,200. Connecting to banks via open banking APIs is the cornerstone of how these firms work. Since the success depends on forming connections with regional banks and fintech consumers, startups developing open banking APIs are generally regionalized.

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