Fintech

bne IntelliNews – Yuno Rides Latin America’s Fintech Wave to Global Expansion

Published

6 months ago

18 July, 2024

bne IntelliNews - Yuno Rides Latin America's Fintech Wave to Global Expansion

Over the past decade, Latin America has emerged as a hotbed of startup innovation, attracting over $16 billion in investment in 2021 alone. Fintech and insurtech have particularly captured the attention of global investors and VC funds, drawn to the region’s highly connected but largely unbanked or underbanked customer base.

Traditional banking in the region has historically been inaccessible to the lower segments of the population, deterred by red tape and high fees. Until recently, cash was king of everyday transactions, with many small and medium-sized enterprises (SMEs) avoiding formal lenders. However, the onset of COVID-19 has prompted a shift towards digital payments, online retailing and mobile-based services, acting as a catalyst for financial inclusion.

Central banks have also cut interest rates during the pandemic, boosting VC funding and prompting investors to seek higher returns over the medium term — a perfect storm for a fintech wave. By 2021, Latin American digital banks had amassed more than 30 million customers, mostly in Brazil and Mexico, and about 300 million users used digital payment services for transactions totaling $215 billion, according to the IMF.

Today, those numbers are likely to be higher, as Nubank, the renowned Brazilian neobank now valued at $44 billion, recently reached the milestone of 100 million customers across Brazil, Mexico, and Colombia.

The shift to contactless payments and e-commerce, fueled by high smartphone penetration and a large pool of ambitious STEM graduates, has created a fertile environment for fintech in the region.

In this context, Juan Pablo Ortega, a young Colombian entrepreneur, began his journey in 2015. After studying in New York and pursuing a career in civil aviation, he co-founded Rappi, a food delivery service that evolved into a multifunctional app offering payment solutions. By 2019, Rappi had achieved unicorn status and was expected to reach a valuation of $5.2 billion by the end of 2023.

He later launched Yuno, a leading payments orchestrator that enables companies including McDonald’s, inDrive, and Avianca to facilitate seamless payments across borders. Last month, bne IntelliNews sat down with Juan Pablo at London Tech Week, where he discussed his journey to Yuno and shared insights into the challenges and opportunities facing the rapidly growing fintech ecosystem in Central and South America.

“One of Rappi’s biggest pain points was payments,” he says. “When we launched in Mexico, we faced a lot of chargebacks, declined transactions, and significant fraud. Many users were uncomfortable entering their credit card numbers.” That led him to found Yuno, a payments orchestrator that integrates multiple payment providers, acquirers, and banks into a single platform.

Launched in 2022, Yuno recently completed a $25 million funding round and is looking to expand into Asia and the Middle East, positioning itself as one of the few truly global tech companies in Latin America.

“There was an urgent need to simplify this fragmented and complex payment ecosystem. It became clear that there was a large untapped market for simplifying payment flows. We needed to simplify transactions, improve efficiency and enhance security by offering a single interface for all payment processes and integrating fraud detection capabilities.”

Fragmentation is a sore point in the region, as domestic banks tend to promote their own payment systems, which enjoy high loyalty rates among domestic customers. However, this does not always translate into success, due to local specificities and different cultural contexts. Furthermore, these indigenous methods offer little interoperability, posing challenges for companies operating across borders.

“Photo [an instant payment platform launched by Brazil’s central bank in 2019] is a huge success. 70% of Brazilians today prefer to pay with it. Mexico has tried to replicate the model with Codi [a similar system promoted by Banco de Mexico]but it was a total failure, because there for small purchases cash is still the rule”, underlines Juan Pablo.

“And if you start looking at the differences, over 90% of Brazilians have a bank account, while in Mexico about 65% of adults do not have a bank account,” he adds, emphasizing the correlation between levels of banking penetration and the success of digital payment systems.

However, in Latin America “we can’t really talk about a regional trend,” he cautions, noting the highly uneven success rate and regulatory frameworks of digital payments in the region, a common problem in emerging markets around the world.

“That’s why Yuno sees greater opportunities in Africa, Asia and Latin America, and why we are primarily focusing on expansion in these areas.”

But how does this affect retailers and merchants trying to enter these markets? “When you enter a country, if you can’t offer local payment methods, you can’t really compete. For example, Uber Eats is having a tough time in Latin America; they [have] They left mostly because they didn’t have local payment methods. They didn’t feel “local,” he explains, emphasizing the importance of offering the myriad national payment platforms that customers trust.

“We are creating a technology that will be the future of the payment infrastructure to offer services to banks, payment processors and different players in the ecosystem. I don’t see Yuno as a competitor to traditional banks, but in some ways we work together with them to help them evolve. And we are a technological enabler for all the different players in the ecosystem,” adds Juan Pablo.

Yuno now connects merchants with over 300 payment methods worldwide. The company also helps merchants maximize their payment transaction approval rates—the percentage of payments that go through successfully—and save costs by redirecting transactions to faster, more efficient, and less expensive providers.

“In Latin America, the average approval rate is 70%, so essentially 30% of revenue is lost due to inefficiencies in payment systems,” he notes.

But Yuno’s ambitions go far beyond the region, as the company is expanding its presence in Southeast Asia, particularly in Malaysia, Indonesia, Singapore and Thailand.

Speaking about regulatory environments, Juan Pablo reveals that despite important differences within countries, the region has become relatively favorable to fintech. Overall, Brazil and Mexico, the region’s first and second largest economies, are now best positioned to support the growth of fintech, he argues.

Strong regulatory frameworks allow new business models to thrive, fostering a healthy type of fintech ecosystem. However, some challenges remain.

“In Mexico, if you apply for a fintech license, it takes four or five years, which is not ideal if you’re starting a business. So there’s a lot of work to do, but we’re moving in the right direction,” he says.

Mexico today embodies what Juan Pablo describes as a “healthy ecosystem,” bringing together local investors and venture capital funds willing to invest in a business-friendly regulatory landscape.

Chile, Peru and Colombia are a bit behind in terms of legislation, but they are steadily catching up, he says. Meanwhile, Argentina, despite its long-standing economic problems, is home to a large pool of highly skilled computer engineers, making it a favorite source of local talent.

Latin America is no stranger to political and financial instability, but Juan Pablo is optimistic about the resilience of local entrepreneurs. Citing the case of his native Colombia, he notes that “even with these [political] Despite the headwinds, we have built a thriving technology company that can compete on the global stage, and we are moving forward from there.”

Leveraging the region’s competitive advantages, Yuno is poised to play a pivotal role in establishing Latin America as a leading incubator for financial innovation.

“We want to transform Latin America into a major development hub, a technology hub, and today we are doing just that, shaping the way global companies operate,” he concludes.

Source

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

Source

Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

To come
Aveni Assistance
Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”