Ximena Aleman is co-founder and chief business development officer at Prometeo, an open banking platform that serves Latin America.
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We are only in the first chapter of Latin America’s long journey to tech growth. But with the region’s thirst for innovation, the market is expected to expand nearly tenfold over the next decade, with open banking through the use of APIs leading the way and acting as digital transformation facilitators.
With LatAm businesses and startups continuously integrating with new-age platforms and services, adopting an API-driven transformation strategy has become essential – as a result, the entire financial system is being “APIfied.”
In other words, this open API ecosystem, in which third-party service providers access consumer data from financial institutions, means financial services will be optimized to lower costs and time spent on transactions and improve user experience.
The advantages of having open communication between different products and services are nearly infinite for credit scoring, moving money between bank accounts, and spanning verticals like the neobanks, credit providers, and personal finance products Latin Americans use every day.
In 2019, API usage was more mature in the financial and e-commerce sectors, but it is now venturing into other areas such as marketing and insurance. Fintech companies are increasingly collaborating with traditional players like banks, payment agencies, insurance providers and stock exchanges. Cryptocurrency trading platforms and companies are also fighting for their space in the spotlight and have adopted API platforms to support crypto-assets since most of their operations are already digitized.
The API revolution seems well underway. So, what’s next for LatAm?
The key to tech penetration in LatAm: APIs
Until recently, many traditional financial institutions and banks in LatAm were gatekeepers, with a bank account being the prerequisite for consumers to participate in the economy. And prior to the advent of fintech, these financial institutions’ back-office infrastructures for risk management, credit decisions, and fraud detection involved manual effort and required cross-departmental coordination.
Each step was carried out by a person, from registering a user to the production of products and services. This often left customer data unexploited, increased transaction costs, impeded innovation and degraded customer experience.
As financial institutions grapple with digital transformation, Andres Meta, VP at Grupo Bind and co-founder of Arfintech, said many banks are partnering with fintechs or accessing technology-based products to create unique business models and stay relevant.
One way to revamp the back-office, lower costs and improve communication is to use APIs. This will enable access to information, improve consumption of products and services, and disrupt and de-structure established value chains.