The world underwent some significant changes last year, which were reflected in certain financial trends. While many financial institutions in Latin America were already digitizing processes, the COVID-19 pandemic accelerated financial trends. Procedures such as identity verification or graphic signature still had to be done at the banks. However, due to the arrival of the coronavirus, banking institutions had to be closed for a time, so users depended on 100% digital services. Randall Castillo Ortega, the founder of SME lender RACO Investment, which serves Panama and Costa Rica, discusses some of the trends being seen in finance as a result of the pandemic.
The popularity of FinTech (financial technology) solutions skyrocketed due to COVID-19. FinTech companies offer many types of financial services and work within diverse markets. Some offer their services directly to users of the financial system, while others outline solutions for other companies. “Fintech companies arise from the union between the financial and technological areas and are promoting a true revolution in the market,” explains Castillo.
The purpose of these organizations is to innovate, optimize and enhance the services of the financial area. Among the services they offer is the evaluation of clients and risk profiles, also known as scoring, fraud prevention, identity verification, banking APIs: applications that allow you to easily create one application with another, payment method aggregators, Big Data analytics, business intelligence and cybersecurity.
Most of these services are interrelated. For example, if a financial institution needs to evaluate profiles to avoid fraud, it contacts a FinTech that offers API services. That FinTech will connect it with another that is in charge of scoring to have the information in seconds. The FinTech space continues to develop greatly and is now found all around the world.
According to experts, the growth of digital banking and its vulnerabilities will cause several more financial trends this year. Among these are self-sufficient finance, which takes the responsibility off consumers’ shoulders and automates the financial decision-making process using artificial intelligence (AI) and machine learning. Open banking will also be seen. Asserts Castillo, “More and more people want to invest their money instead of keeping it in the bank and open banking gives third-party financial service providers access to consumer banking data through application programming interfaces (APIs) for investment purposes with consumer consent.”
There are still lines due to the limitations of online services. However, the total eradication of physical contacts for banking transactions was accomplished with the pandemic. New generation financial institutions rose to the occasion and with increasing competition among them to offer digital services, consumers have a number of attractive offers to choose from.
Fintech solutions are effective tools for financial education. Each bank offers a collection of information, to support consumers with bad finances in learning to organize.
The migration of banks to the digital cloud was a trend since before the pandemic. It is estimated that more than 90% of banks globally have moved at least one of their procedures to the cloud. This trend is continuing and is rapidly gaining more support among financial institutions. It gives them more flexibility and allows them to respond more quickly to customer inquiries.
With unemployment levels rising due to the emergency, many people looked for financing alternatives. Among them were cryptocurrencies and the applications associated with them. The main cryptocurrencies that are dominating the digital world are Bitcoin, Ripple and Ethereum. There has been a major shift already this year that is finding more access to digital currencies in retail settings, and this is expected to continue through the rest of the year and for the next several years.