Fintech, AI, and Crypto will shape the future of finance

Hola!

Today's newsletter is future-looking. Most of the solutions I will mention are already in the kitchen ?? or in production. I've recently been asked by product leaders and investors how I am thinking about the synergies between AI and Fintech, so hopefully this shares some light on this hot-trending topic.

Fintech at the front, AI and Crypto at the back will set the new generation of financial services solutions

It always starts by asking the right questions. I've received a lot of "Edu, what are the Fintech AI solutions you've seen others ship successfully?". ? [horn sound] Wrong question. We need to go back to first principles, and ask ourselves, what are the main problems our target segment has around its financial life? For example:

• Saving money
• Increasing their wealth
• Organizing their finances
• Planning their financial lives
• Reaching their financial objectives
• Dealing with debt
• Lack of financial education

And so on, and so forth... Then, AI, such as Crypto (Blockchain), is just a technology enabler that brings better solutions to the customers than the current ones.

We are going through the third Financial Services disruption over the past years:

• First, Fintech disrupted the UX and UI and improved the user experience and accessibility. The pandemic (people couldn't go to banks), together with free money (more investment in fintech startups), accelerated mobile and digital adoption and raised the bar in user experience. This first wave has driven financial inclusion at great speed
• Second, Blockchain technology (Crypto), enabled higher security, traceability & transparency, and borderless money payments at a fraction of the incumbent players' cost.
• Third: AI is going to bring another layer of innovation to raise the bar one level higher, and data becomes king.

The future of financial services will be a merger between all of the above. Fintech at the front, AI and Crypto at the back will set the new generation of financial services solutions.

AI can enhance customers' and companies' financial lives

Let's jump into the main use cases AI can solve:

• Customization: offer personalized offerings tailored to the customers' needs. E.g. If a customer pays the credit card bill on time, every month, it probably doesn't need an offering of credit card bill financing, but to enroll it into automatic debit it never misses a bill
• Productivity & Automation: AI can help automate repetitive processes, such as data entry, analysis, and payments. In B2B Fintech, for example, many companies need to pay the same providers every month. AI could help identify the cash flow movements and recipients, and automate those money flows, saving time and reducing errors.
• Decision-making and forecasting: machine learning models trained on data sets can help with fraud, credit risk analysis, and all types of financial forecasting
• Customer Insights and Analytics: by training the ML models, AI can provide recommendations to customers (B2C & B2B) to help solve their main pain points, for example, predicting their future cash flow needs to avoid entering into debt. E.g. "It seems you've spent more than your estimated income for the month, here are some recommendations to cut your spend/ increase your revenue by $100,000 before June 15th to avoid entering into revolving debt/take a personal loan to reduce your cost of debt in advance". Virtual financial assistants and virtual wealth managers will become the norm in some years.
• Customer Service: AI can help not only improve customer servicing but also reduce costs for companies that offer it. AI models trained on customers' data can provide customized answers based on the customers' historical data and provide assistance with any need they have. Some people still want personal service, so those who want to serve their customers best will need a good balance between human and AI CX.
• Insurance 3.0: insurance companies manage huge amounts of data, and have been leveraging AI tech for some time now. AI is boosting the claim processing capacity, pricing&risk models, and customer servicing.
• Security & Authentication: facial ID, Voice ID, biometrics enhancement, and others are some of the ways AI is increasing security layers around financial services

Companies with a large customer base and strong Data teams will have an advantage on the AI race

AI's machine learning models are fueled by data. The more data you have, the richer the output of your machine learning models. Companies that can effectively collect large amounts of data from their customers with the proper teams and resources, and can build the machine learning models to process and provide value to customers will have an advantage in the AI race. Within the Neobanks for example, Nubank has recently announced reaching 80 million customers, and has one of the best Data teams globally.

In B2B, AI can be a true differentiator to serve companies. What are the best doing:

• B2B Fintech Ramp has announced two days ago the launch of a Money Saving AI tool for businesses, called Ramp Intelligence. Ramp Intelligence features a suite of services using OpenAI's GPT-4 technology to analyze software prices, scan email receipts, audit expense reports, and respond to customer queries—not unlike the popular ChatGPT service itself. Other announcements in Ramp AI include a chatbot with cost-cutting advice (using expense data to answer questions such as, ‘How can I cut operating costs?') and a Gmail and Microsoft Outlook integration that automatically identifies and scans email receipts to process expenses in real time—while flagging unusual transactions. Ramp claims their technology has helped its average customer cut 3% off their expenses annualy
• Stripe , launched a tool in March using GPT-4 to help developers search company documents and get summarized responses—effectively allowing them to cut down time spent reading.
• Navan , the travel and expense management startup, debuted a customer service chatbot named Ava using OpenAI to field queries from travelers and company finance teams

Final thoughts before diving into this week's news

Financial services are being disrupted, and our whole financial lives will soon enter auto-mode. Fintech + Crypto + AI are re-shaping the finance world. What an amazing time to be alive and build the next financial services generation. I'm extremely amazed on the progress so far, and cannot wait to start developing some AI products myself at Clara over the following months.

?? Fintech bites of the Week

1. Cilia, a Brazilian startup focused on simplifying the work of car workshops, part suppliers, regulators, and insurers, secured a $21.8M venture round led by Cloud9 Capital and Mercado Libre.
2. Nubank announced that on the following 10 years they will invest heavily in AI, to help customers day to days beyond their financial lives. In addition, they want to double down over the following years on the high-income segment, which they have failed so far in conquering since their Ultravioleta launch
3. Presto, Bolivian Fintech, has announced the launch of the first BNPL (Buy Now, Pay Later) in Bolivia, focused on serving the underserved who cannot access to credit due to the huge penetration of informal labor
4. Lemon , the Argentine Crypto Exchange, has announced the launch of its operations in Mexico. Congrats Vicky Guareschi and team ??
5. Ualá , the Argentine FinTech who has expanded its financial services, is expanding its B2B business, (Ualá Bis) in Mexico, with mPOS payment solutions for small and medium companies
6. PicPay , the Brazilian giant Fintech, has launched PicPay Open Finance, to allow customers to connect and visualize the information of all of their financial institutions to help them manage their financial lives. The product also enables money transfers between accounts from different banks without additional fees or commissions.
7. 家乐福 , the supermarket chain, has launched a virtual prepaid card in Argentina through its BSF Bank to provide financial services for the underserved and unbanked
8. Uber just got their IFPE license in Mexico, which will allow Uber to ?? Issue Debit Cards,??Offer a digital wallet and receive deposits from customers, ?? Get yields over its customers' deposits, ?? Allow their customers to send/receive payments in MXN. More here .
9. Nubank , the Fintech giant, has beat a new personal record: US$142m of Profit in a Quarter. All you need to know about their last quarter's performance here (humble brag this has been my most viral post ever)
10. C6 Bank , is launching a new credit card tailored for the higher income population, called Graphene, with better benefits to be disclosed
11. Mercado Livre Brasil and VTEX partner to make a safe-check-out experience connecting the e-commerce with their banking accounts to have an embedded PIX experience
12. Grupo Mexico, Mexican conglomerate, announced they will acquire?Citi's?retail banking operations in Mexico for $7 billion
13. Pomelo , Argentina BaaS/SaaS, and Mono, Colombian Fintech, announced a partnership to launch Visa credit cards in Colombia to companies, through a BIN Sponsorship deal. Felicitaciones Juan Camilo Poveda !!

??Latam Financial Stats and Data

??Brazilian Card Payments are going up and digital ????

• Brazil took the 2nd place in the World in real-time payments volume, right with 29.2billion transactions in 2022. India led with over 40billion transactions. In March, PIX broke a new record hitting over 3 billion transactions.
• Credit Card annual interest rates in Brazil are on average 430%

That was all!

Amazing week, full of exciting news and new launches. AI is not coming, is already here. Looking forward for what's ahead and how will financial companies will automate our financial lives. Grateful to be part of those who are building that future.

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Un abrazo & have a nice weekend, ??

Edu