Open banking – where traditional banks can share data, and build new services, via APIs that bring their legacy systems into the 21st century – has seen its biggest traction yet in mature economies, where the vast majority of consumers and businesses already have bank accounts; Is it a reality with digital transactions? They are willing to try new approaches to solving everyday problems if it can save them time and money.
But even in more developed markets adoption is still very slow – in the UK, for example, only 11% of consumers, and 18% of small businesses, have ever done so. Use open banking – Some bet on that TRUE The promise of these new services lies in developing economies.
Prometo, a startup from Uruguay that is building channels to enable open banking across Latin America, today announces that it has secured $13 million in funding to expand its business. The valuation was not disclosed but the company says the round is at a “standard” Series A dilution level, meaning it is now likely to be valued at less than $100 million.
Since its founding in 2018, Prometeo has grown to date thanks to relatively lean funding. Before this round, it had only raised about $6 million, says co-CEO and co-founder Ximena Aleman, who previously worked as a journalist covering the media and technology industries before turning to fintech.
Perhaps in keeping with its CEO’s unlikely roots, Prometeo is also taking an unconventional path to growth.
Much of open banking these days has focused on a national rollout – not least because banking agreements and regulations are often highly localized. Prometeo takes a different tack and treats Latin America and its broad segmentation as a single market, and uses a single API to do so.
Under this API, it has so far operated around 350 channels across 283 financial institutions in 10 countries. Brazil and Mexico are the two largest countries at the moment, as well as being the largest fintech markets in the region overall. Aleman, who shares the CEO job with co-founder Rodrigo Tomayan, said its most popular services so far reflect those that have also found traction elsewhere: account-to-account payments, account validation, and (for businesses) cash management.
She added that the plan aims to attract more users, add more services, and expand into other geographic regions, while increasing revenues 10-fold in the past two years (the startup does not disclose actual revenue numbers).
However, the challenges facing businesses in open banking in the region are significant, starting with the fact that Latin America generally lags far behind more mature markets such as Western Europe and the United States when it comes to financial services.
Bank account penetration is estimated to be around 70%, and although this shows growth, it still lags behind the high rate of over 90% seen in countries in other regions where open banking has taken off and taken off.
“There are still a lot of improvements to be made for financial inclusion,” admitted Aleman, who describes daily transactions between most businesses and consumers as “mostly cash-based.”
However, if we look at it differently, this could also be an opportunity. In more established markets, one of the biggest competitive barriers is the ubiquity of existing payment lines – specifically those operated by the likes of major credit networks like Visa. This challenge is, at least, smaller in Latin America. (It’s not the only company that thinks open banking has a big role to play in financial services in the future: last year, open banking startup Ivy raised funding specifically to expand into Latin America; Christine wrote extensively here about Finerio, a An ambitious open banking startup from Mexico.
The companies backing Prometeo in this round emphasize not only those who want to grow their business in the region, but also those who believe open banking can help them achieve this. Antler Elevate, a company with roots in the Asia-Pacific region, leads the round, with participation from PayPal Ventures, Samsung Next, DN Capital, Cometa and Magma Partners.
It should be noted that PayPal and Samsung Next are not yet working with Prometeo on services, but the startup’s support indicates their intentions and interests. PayPal has been establishing its roots through investments in local startups for years in the region. One of the largest such investments was in 2019, when it invested $750 million in the MercadoLibre marketplace. Most recently, last year it led a $14 million round nocnoc, specializes in cross-border trade in Latin America. It also owns point-of-sale payments company Zettle, which has been very successful in Latin America for years now.
Meanwhile, Samsung is the largest mobile phone seller in the region, with a significant market share more than 40%.
Either way, there is a clear interest in having a major partnership, and an early seat at the table, in an area that could go big, even if that is not the case now. Digital wallets, including mobile wallets – which both companies are betting will play a big role in how people transact in the future – still represent a very small piece of the commerce pie in the region, accounting for only 10% of all transactions As of 2020.
But the startup’s progress, and the interest it has generated among the region’s biggest banking players – with partners such as Citi, Santander, JPMorgan, Vitex and several local players – has caught the attention of investors.
“Prometeo, through its simple single API, provides banks and financial institutions with access to payments and data across Latin America,” Fadi Abdel Nour, partner at Antler Elevate, said in a statement. “We are excited to partner with Ximena and Rodrigo to build a company that not only advances technology, but also empowers businesses to reach new heights of success.”