“I am surprised that there are so few bank Fintechs open in Spain”
Fernando Rodriguez | Nuria Aliño, World Bank Advisor and Director of Soltec, one of Spain’s publicly traded solar energy companies, joined the global organization in 2016 to drive the adoption of disruptive technologies in different sectors and countries. She is currently a digital financial services specialist at IFC-World Bank, with a focus on digital transformation.
Question: You advise the World Bank, which focuses on poverty reduction and underdeveloped countries. Why open banking, digital banking, fintech, etc. are they so important to the World Bank?
A: Because the objective of the World Bank is to reduce poverty in the world and in order to channel its financial resources to countries, the bank is essential. The World Bank supports the public sector and private companies. And in both cases, the financial sector is very relevant. The private sector is under the responsibility of the IFC (International Finance Corporation), in which the financial industry represents 45 to 50% of its portfolio of 58,000 million dollars, as it is a fundamental channel for the money to reach the most disadvantaged sectors. Regarding governments, the World Bank supports them in strengthening their financial systems to make them more efficient and competitive and thus expand access to financial services for underserved populations. When we talk about open banking, we must distinguish between the support that the World Bank provides to regulators and the support it provides to financial institutions …
Question: How? ‘Or’ What?
A: For regulators, this helps them understand a global trend that encourages financial institutions to share – with authorized third parties – customer data or other financial services such as payment initiation, in a readable format – what called the application programming interface (API) – with the consent of the customer. And it helps financial institutions accelerate their integration strategy with partners through APIs to deliver financial services in their ecosystem. Open banking favors collaboration between the various players you mentioned, which translates into an improved offer for the customer. Traditionally, financial services were provided by financial institutions, but this is no longer the case and there are new financial service providers with a very convenient offering for customers. For example, Ant Financial in China or Mercado Libre in Latin America, which started with payments, now offer a wide range of financial services to individuals and businesses operating on their platforms. Credit is no longer issued exclusively by traditional banks. This is why the World Bank works with these ecosystems, where we talk about integrated finance, contextual banking. As part of an activity, the customer pays or accesses a loan.
Q: The World Bank’s interest in “open banking” is therefore based on increased competition, access to the financial sector for excluded populations, innovation, transparency?
A: That’s right. The interest is to make regulators and financial institutions aware of the benefits it generates in relation to these pillars. In many countries, there are three or four institutions that have an 80 or 85% market share, and they don’t always focus on financial inclusion. This is why open banking is important to the World Bank because it promotes competition and financial inclusion.
Question: From your point of view, how do you see the Spanish fintech market?
A: The level of fintech development in a country depends mainly on the degree of development and deepening of the bank, and the availability of venture capital resources. For example, in China, since there is no retail bank, the big platforms were very successful because the user had no other choice. In the United States and Asia, there are a lot of resources available on the venture capital side interested in investing in fintechs that want to expand into markets where they have fewer competitors. In the case of Spain, apart from the fact that traditional banking is highly developed, venture capitalists prefer to invest in the European market, rather than in the Spanish market alone. If you look, Spanish fintechs that are internationalizing do so more in Latin America than in Europe, where entry barriers are higher. You don’t see a lot of Spanish fintechs with a strong positioning in Europe, whereas you see British or European fintechs with continental expansion. Venture capital prefers a company with expansion in Europe to a Spanish company with a limited market.
The Spanish fintech market is developed, but is struggling to attract international funding to develop. However, in Spain I am surprised to see so little fintech related to the open banking space. In other markets, more and more players have emerged to meet the need to adapt to open banking, such as account aggregators, connectivity infrastructure providers or banking service providers as that services. In fact, in one of the projects I’m working on, it’s a challenge to find BaaS providers to help migrants open an account and make international payments to their home country.
Q: What do you think of the sandbox system to develop the fintech market in Spain?
A: It’s a great idea to promote innovation. In fact, at the World Bank, we promote sandboxes because it’s a testing environment for regulators, central banks, supervisors… I’ll give you an example. With the Covid19 lockdowns, there have been many countries where in order to pay the grants of $ 50 or $ 100 per month to many people living in absolute poverty, we have had to change the regulations and leave the people who couldn’t leave their house open accounts fully online. Including remote identity validation. In many countries this possibility has been introduced, but others have not yet done so and are testing through the sandbox before implementing new regulations in this direction. The regulator tests, and when they feel comfortable and understand the implications, they change the regulations, which boosts their economy. Additionally, innovators do not want to meet resistance from regulators, and sandboxes are also helpful in avoiding this.