Retain, build loyalty, cut red tape, facilitate. Actions such as these figure on the list of challenges to be overcome by companies of all sizes and sectors, and are essential to guide actions aimed at improving the customer experience, a relevant differential in an increasingly competitive market. And it is in this scenario that the concept of Fintech as a Service (FaaS) is gaining momentum.
Capable to enable the implementation of financial solutions in businesses that do not have as their core business the offer of financial products and services, the Fintech as a Service model represents, for fintechs in the sector, another possibility of expanding their operations, and for companies in other segments, an alternative to increase the portfolio of offerings without the need to worry about issues related to technological development and regulatory issues.
In this content, we explain everything you need to know about Fintech as a Service, how this model works, and what the main advantages are. Enjoy your reading!
Fintechs and the Brazilian scenario
Before we present the concept of Fintech as a Service, it is important that you understand what exactly fintechs are and how they fit into the contemporary scenario.
Although increasingly popular, the concept of fintech is still unclear to many people. In short, fintechs are startups that rely on technology to offer fully digital financial solutions.
It is common for many people to relate the activities of fintechs to the famous digital accounts and credit cards, but it is important to know that the scope of these companies goes beyond these two segments. In Brazil there are 1,158 such companies, according to the District Fintech Mining Report 2021. They are divided into the following categories:
- payment means;
- credit;
- backoffice;
- insurtech;
- digital services;
- cryptocurrencies;
- risk and compliance;
- technology;
- investments;
- loyalty;
- crowdfunding;
- personal finance;
- debt;
- foreign exchange.
Furthermore, it is important to know that according to a resolution of the International Monetary Council (CMN), launched by the Central Bank, fintechs can be divided into two operational models: the Direct Credit Company (DCS) and the Inter-Personal Lending Company (SEP).
Thus, fintechs that fit into the SCD model are allowed to grant loans from their own resources, while fintechs allocated to the SEP model work as intermediaries in loans and financing operations from person to person (PEP).
In this scenario, the Central Bank has been playing an important role by constantly authorizing the expansion of fintechs’ field of activity in the financial sector. Examples are the permission to incorporate into their activities custody operations, insurance and sale of credit rights.
What is Fintech as a Service?
Fintech as a Service’s main objective is to enable the inclusion of financial products and services in a totally customized way in the portfolio of companies that are not from the sector.
In practice, FaaS works directly with the development of the technology required to create financial products and services that can be incorporated into companies from other sectors, without the need for these companies to worry about regulatory issues, since the solutions already comply with the established norms.
Another important detail refers to integration, which is done in a simplified way, through APIs (Application Programming Interface), and generally occurs in a modular way, that is, the company is allowed to acquire only the solutions that make sense for the business.
How does a FaaS work?
For you to better understand this concept, we will resort to a comparison often used to explain it: that toolbox.
By using a FaaS, the company has access to a kind of box, with all the necessary instructions and tools to offer its client financial solutions. To use it, all that is needed is to customize some points, such as the operating rules.
Let’s take as an example a company in the retail sector that sells clothes. The core business of the business in question is selling fashion and beauty products. However, thinking about the consumer experience, the same store decides to offer credit-related solutions, such as digital accounts or credit cards.
Instead of developing technological solutions capable of supporting this financial offering, the retailer can simply rely on the support of a FaaS.
Besides the digital account and credit card mentioned in the example, other solutions that can be offered by a Fintech as a Service are:
- loans;
- investment options
- insurance;
- payment of various bills;
- value transactions, such as transfer via PIX, TED or DOC.
What is the difference between Banking as a Service and Fintech as a Service?
At this point in the article it is natural for you to wonder what the difference between Banking as a Service and Fintech as a Service is. Although both concepts are related to enabling the offering of financial products and services to companies outside the industry, there are differences.
In Banking as a Service, the technology provider enables the creation of a bank from scratch, i.e., develops customized solutions to make the financial offer possible. This includes issues related to the necessary regulations to operate in the market and to the relationship with other companies in the segment, such as those that control card brands.
Fintech as a Service, on the other hand, works with a packaged technology, created for this purpose and in compliance with the necessary regulations.
What are the advantages of choosing a Fintech as a Service?
As we have already said, the possibility of incorporating financial products and services to businesses that do not have these resources as their core business without having to deal with bureaucratic issues related to regulation is the main advantage of having a Fintech as a Service.
Another benefit that deserves to be highlighted is the possibility of reaching an unbanked public, but which moves the Brazilian market in different sectors.
We are talking about the 34 million Brazilians who, according to a survey conducted by the Locomotiva Institute in 2021, have no bank account or make little use of it, and who move 8% of the total money that circulates in the country.
For companies, reaching this audience, facilitating the consumption of products and services through financial offerings that are not linked to traditional banks, represents a great possibility of business expansion, as well as customer retention and loyalty.
How can Monitora help?
Monitora is a specialist in developing solutions for technological transformation. We have a team of experts capable of supporting fintechs that want to expand their operations and operate in the Fintechs as a Service model.
We take care of the entire technology development process – service design, requirements engineering, software design, implementation, quality control, deployment and maintenance – to help our clients keep focused on their business strategies. All this with the agility that the market demands.
If you are interested in this topic and want to better understand how FaaS can open good opportunities for expansion and performance for your business, please contact Monitora.
