While open banking is a global trend, its implementation is fragmented. Fintech startups working to make it a reality in smaller markets could become acquisition targets for major players like Visa.
One such startup is Y Combinator alum Fintoc, a B2B fintech company that recently secured a $7 million Series A funding to strengthen its presence in Chile and Mexico.
Fintoc offers an API that enables online businesses to accept instant payments directly from customers’ bank accounts, known as accounts to accounts (A2A) transactions. This method provides an alternative to credit card payments with fewer intermediaries.
A2A transactions are user-friendly, as customers can select their bank and securely authenticate their bank details without entering card information. Businesses benefit from lower fees compared to traditional credit card transactions.
Various countries now support A2A transactions, creating opportunities for open banking companies like Plaid, Visa-owned Tink, TrueLayer, and Volt. General fintech players like Adyen and Stripe have also joined in by partnering to offer A2A payments.
However, Latin America presents unique challenges for global players due to fragmentation and low banking penetration in certain regions like Mexico. Fintoc sees this as an opportunity for growth as neobanks address financial inclusion gaps.
Despite facing competition in Chile from companies like ETpay and Khipu, Fintoc has gained significant traction with large clients for a variety of payment use cases.
With plans to expand in Mexico, Fintoc’s Series A funding round marks a strategic move amidst a shifting funding landscape for Latin American fintech startups.
Toned-down Expansion
Fintoc’s earlier ambition of being the “Plaid for LatAm” has evolved into a more focused strategy targeting specific markets like Mexico and Chile. This shift aligns with changing investor preferences for more thoughtful country-specific expansion plans.
Despite the decreased funding activity in Latin American fintech, Fintoc remains optimistic about its Mexican expansion as a key revenue driver in the coming years.
With strategic investors like Brazilian fund Monashees and U.S.-based Propel, Fintoc has the support and connections necessary for successful expansion in the region.
As instant payments gain prominence globally, Fintoc aims to offer a seamless payment experience for Mexican businesses transitioning from traditional offline payment methods.
With the rise of systems like Pix in Brazil, UPI in India, and FedNow in the U.S., traditional payment giants like Mastercard and Visa face increasing competition from software vendors and tech firms, prompting strategic acquisitions in the payments space.
