Early in the week, focus was on Colombia’s first quarter GDP number (0.7%), which was above estimates. Industry (-5.9%) and commerce (-0.8%) continue to struggle, but the public sector (5.3%) and agriculture (5.5%) reported positive numbers. Construction (0.7%) finally rose, but the sector needs to offer much more in order to be the economic driver it should be.

The National Administrative Department of Statistics (DANE) also reported the latest real sector data for March, with manufacturing production (11.1%) and retail sales (5.6%) falling significantly once again. These compute with both the GDP and industrial activity data, not to mention Banco de la República’s continued stubbornness on reducing rates at the appropriate rhythm. The government has already stated that if the central bank doesn’t breathe life into the economy, it will via raising the debt ceiling — or putting some flex into the fiscal rule.

However, reacting to this, Fitch Ratings stated that tampering with the fiscal rule would only hinder the nation’s hopeful return to investment grade. They added that the same fiscal deficit was part of the reason that the administration of former President Iván Duque lost the investment grade in the first place.

Colombian David Velez has created a regional phenomena with Nubank, albeit he had to go to Brazil to do it, however his homeland has proven to be less welcoming. This week Velez spoke of the complicated regulatory environment in Colombian and the complications surrounding the banks plans to expand further.

Perhaps that is why he started in Brazil, a country that is light years ahead when it comes to its financial architecture and authorities that are far more enlightened when it comes to providing a more and efficient environment for clients.

Superfinanciera of Colombia is jurassic by comparison —  fearful of change — a fact borne out by its intransigence as Bolsa de Valores Colombian stock exchange has slowly died in front of our eyes, with the only recourse being to salvage itself via nuam exchange. Although, no doubt, Superfinanciera will have a say along the way.

As for the banking sector, it has been a high-cost oligopoly — for decades dominated by Bancolombia, BBVA, Grupo Aval and Banco Davivienda — with Asobancaria seemingly happy with the current situation. There is much chatter about open finance, etc. — but it will only happen on the terms of the current dominant players.

Colombia needs 10 neobanks, as well as a raft of other financial institutions, to both lower fees and improve client attention.

There is much chatter about startups and fintechs.

But most lack the size or expertise to compete with the big boys — and many will sink without trace.

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What is a sure thing is that Colombia is going to see a very disruptive 2022. But, before anyone thinks for a minute that I am going to dive down a political rabbit hole, I am not talking about the forthcoming Presidential elections. Yes, it will be fun to watch, and I would certainly not rule anything out at this stage, but I am talking about a continuation of the kind of positive disruption that has already taken hold in Colombia, and which is rapidly changing the financial landscape.

Over the last 2-3 years a host of new actors have either arrived in Colombia, or more exciting still, been created in Colombia and it is a trend that is gathering momentum. Recent weeks have seen market headlines dominated by the Gilinski family’s backing of bids for Grupo Nutresa and Grupo Sura; however back in the summer they also saw the digital financial arm, Lulo Bank, get its banking license. This made less headlines but was also a significant move, the major banks such as Bancolombia and Davivienda already have digital platforms called Nequi and Daviplata respectively but now there is a new player.

We have also this year seen the appearance of IRIS, another ‘neobank’, this time geared towards the corporate sector; when it comes to competition, the more the merrier. All this is without counting the arrival of Nubank back in September 2020 – across four countries they have close to 50 million customers and now with their IPO war-chest of $2.6billion USD are surely set to make further inroads wherever they operate.

Other areas have also seen developments. In the payroll loan sector (libranzas), we witnessed the appearance of Avista who also became the first fintech to issue a bond in the public market. In the commercial space another new name was Addi – again finding space in the market to facilitate consumer loans. In fact, wherever you look there are new actors.

Did I mention Rappi? Little more needs to be said. They have utterly disrupted last mile services and are rapidly (excuse the pun) moving into other areas such as finance, whenever they do decide to IPO it will be a major event.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

This year also saw the first fully digital equity trading platform in the guise of Trii. Colombia has lost 100,000s of retail investors over the last decade and Trii is tapping into this – their ambition is to move themselves into other countries in the region and move towards one million clients, few would bet against them. There are other new platforms enroute such as Tyba from Credicorp and the hope is that they will be fully digital as well – elsewhere Ualet (Wallet) has been offering funds for some time.

At the BVC back in 2019 we launched a2censo, the first fully digital crowd-funding investment platform and it continues to power ahead. It has now successfully placed 94 campaigns raising close to $10million USD for some of the 2.5million SMEs who are the lifeblood of the economy. Next year the BVC will go further looking to offer not just debt via a2censo but also CBs and equity – a potentially vital step in offering access to the equity market for previously overlooked smaller companies.

Looking into 2022 the BVC aims to further support the digitization of the market, bringing clients ever closer to the markets whilst facilitating their investments. Oddly in many respects the BVC is not viewed as a force for change but through a multitude of products it is constantly driving new markets by supporting innovation both internally and externally. In English we call it Chinese Whispers, in Colombia it’s ‘Teléfono Roto’ (Broken Phone) but the BVC has so much more to tell when it comes to the fintech space and its involvement in it. Keep an eye out for ‘Porto’ in 2022, already launched in conjunction with our new webpage, it will soon offer investors the opportunity to access a variety of products directly.

What all the above have in common is less bureaucracy. There is less queuing at physical locations, less paperwork, if any, to full out. Just as the traditional banks are trying to increase efficiency via more online payments, the new actors in all of their respective sectors are finding niches in which to operate at low cost.

Colombia in the end is only following what is already to be found in the developed world. The millennials live in the cloud, nothing for them needs to be on a document or in a vault – they are content to control their finances from the palm of their hand. Equally trading stocks and shares via APPs is nothing new, countries such as the US or UK have been doing it for many years, they are however markets that are far more liberal when it comes to trading regulations.

So, as we can see – 2022 is set to be very disruptive once again and that is good for everybody. End clients will benefit as the offering increases, but the financial sector will also be a huge beneficiary as competition invariably creates a ripple effect that drives innovation and efficiency which in the end pleases shareholders.

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That is about it for today – with that I would like to wish everyone who takes a brief look at this note a very, very Happy New Year and the very best for 2022.

My regards to all,

Roops

“We are excited to keep working with Mambu. It has helped us deploy Colombia’s first digital bank for SMEs. We are reaching out to the country’s traditionally underserved sector with solutions that are not only easy, but also scalable and effective, allowing us to provide a wide array of value-added services to our clients,” said Lorenzo Garavito, CEO of both Iris & Financiera Dann.

Mambu’s cloud-native SaaS subscription-based platform allows Financiera Dann Regional to expeditiously scale its growth and enables agile SME product design and launches.

“We are very excited to continue expanding our relationship with Financiera Dann Regional to power IRIS, Colombia’s first neobank for SMEs that provides digital financial products to the business sector. Our cloud-native platform provides the flexibility, agility, and speed financial institutions need to construct full suites of cutting edge digital financial services. As the world’s only true SaaS cloud digital banking platform, we can design, deploy, and scale clients’ projects faster and more securely than any other company on the market,” said Edgardo Torres-Caballero (above), Managing Director of Mambu Latin America.

IRIS by Financiera Dann Regional calls itself the first neobank focused on the corporate and business sector born in Colombia. On June 2 of this year, the Financial Superintendence of Colombia granted the new bank authorization to operate in the digital banking sector with the approval of the savings section and its regulations.

“Colombian entrepreneurs are always open to innovations and with the pandemic it has become more urgent to optimize time and improve profitability, therefore, we speak of agility and transparency. Definitely, we are the new generation of financial entities with 100% digital, secure and fast transactions, aspects that millions of Colombians know in their personal accounts, but that did not exist in the business segment. That is why we created IRIS, a brand with products and innovative services,” says the new CEO, banking industry veteran Lorenzo Garavito.

With its irreverent advertising and its differential logo, the neobank wants to communicate that through its products, companies, regardless of their size, have control, monitoring and accompaniment. The first product of the neobank is a 100% digital business savings account, created after a detailed and rigorous market research process that Garavito says included listening carefully over several months to understand the unmet needs of Colombian entrepreneurs and finding a way to solve them, having always the user experience as the center of the strategy.

Free transactions, interest bearing account, and no maintenance fee

“IRIS was born taking care of our clients’ time, which is a vital resource; that is why we say that one of our differentiators is the agility to improve the user experience. For example, the processing of the application for the business savings account, from start to finish, takes only 5 minutes on the platform and the approval takes a maximum of 24 hours. Once operational, the businessperson or entrepreneur can monitor in real time to make timely decisions, manage permissions of financial operations according to employee profiles and access all kinds of graphs and summary information that streamlines administrative, financial and analytical processes,” adds Garavito.

One of the great attractions of the IRIS savings account is the free interbank transactions depending on the balance that the company manages. For example: Every account receives 50 free transactions, with a balance up to $50 million the number rises to 100, with $250 million it receives 200 transactions and an average balance of $500 million gets 500 free transactions.

As a technology focused online bank, IRIS abandons the traditional model of retail offices, long lines and cash management needs. This policy of innovation aligns with next-generation businesses that operate with online and cashless market strategies.

“As the months go by, we will be sharing new services connected to the savings account and other products that will be part of our extensive 100% digital portfolio that, of course, will also have payment solutions, financing, digital cards, among others, all to facilitate the control of expenses,” explained Garavito.

According to projections, IRIS expects to gain 6,000 business customers and carry out operations in excess of $80 billion pesos during the first year of operations.

“Being the first neobank created by and for entrepreneurs, we interviewed managers, executives, administrative heads, payroll managers, among others because we wanted to get to know their day-to-day life closely. Then we began to design solutions and in the implementation process we carried out tests to guarantee the adequate performance of IRIS, assuring Colombian companies and businesses a new experience in financial services,” said Garavito.

IRIS was financed and structured through Financiera Dann Regional Compañía de Financiamiento S.A. which has nearly 25 years of experience in various sectors such as construction, infrastructure, telecommunications, commerce and education.