We are simply at the beginning of Latin America’s lengthy road to technological development. However, due to the region’s appetite for innovation, the market predicted to grow nearly tenfold over the next decade, with open banking and APIs leading the way and serving as digital transformation enablers. With LatAm enterprises and startups interacting with new-age platforms and services on a regular basis, implementing an API-driven transformation plan has become critical — as a result, the entire financial system is being “APIfied.”
In other words, because of the open API ecosystem, which allows third-party service providers to access customer data from financial institutions, financial services will improved to reduce transaction costs and time, as well as improve user experience. For credit scoring, moving money between bank accounts, and spanning verticals like neobanks, credit providers, and personal finance products that Latin Americans use every day, the benefits of having open communication between diverse goods and services are practically unlimited.
API usage was more mature in the banking and e-commerce sectors in 2019, but it is increasingly expanding into other industries like marketing and insurance. Traditional actors such as banks, payment agencies, insurance providers, and stock exchanges are increasingly collaborating with fintech startups. Since most of their activities already digitized, cryptocurrency trading platforms and companies are vying for attention and have implemented API platforms to support crypto-assets. The API revolution appears to be in full swing. So, what is in store for Latin America?
Until recently, many traditional financial institutions and banks in Latin America served as gatekeepers, requiring consumers to have a bank account in order to participate in the economy. Prior to fintech, these financial institutions’ back-office infrastructures for risk management, credit decisions, and fraud detection needed human labor and cross-departmental collaboration. From enrolling a user producing products and services, each step completed a human. This frequently resulted in untapped client data, higher transaction costs, stifled innovation, and a poorer customer experience.
Many banks are cooperating with fintechs or using technology-based goods to establish innovative business models and stay relevant, according to Andres Meta, VP at Grupo Bind and co-founder of Arfintech, as they battle with digital transformation. APIs are one approach to modernize the back-office, save costs, and increase collaboration. This will increase information access, improve product and service consumption, and disrupt and de-structure traditional value chains.
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