Colombia: An emerging market for neobanks

Friday, August 6, 2021

Colombia: An emerging market for neobanks

Neo-banks are the new players in the digital market making their way into the Latin American banking system, especially for a sector that has been excluded from traditional banking, in the case of Colombia, this is no exception.

Colombia has a financial inclusion of just 55.6% in the rural area and 66.7% in the urban area, in this scenario the neobanks have stood out by offering novel opportunities for this sector until now excluded.

The neobanks were born in a digital environment, which provided them with a great advantage in terms of competitiveness by offering a lower cost per transaction, serving a digital native population, in an easy, fast environment that does not require paperwork or branches. physical.

Currently, neobanks are divided into those that have their own banking license, such as Nubank, and those that depend on a bank to obtain it and operate through an App.

Neo-banks took advantage of the delay that traditional banking had in offering their clients faster financial services through the use of digital technologies.

So the innovative and modern user who demands a much faster and more efficient banking will be the main focus of attraction for these financial ventures.

The concepts of neobank and FinTech are based on the fact that neobanks are banks that use the FinTech philosophy, however, fintech companies are not banking entities, they are only intermediaries between the bank and the clients .

Given the appearance of these new competitors in May 2019, the Colombian Congress approved the “ Fast track” , which refers to conditional licenses for companies that offer digital financial services.

In addition, it allows them to obtain a temporary operation certificate, with capital and minimum requirements to function without cumbersome procedures for a period of two years before the final one is issued.

Neo-banks in Colombia require authorization from the Financial Superintendency since they all have a traditional bank behind them.

Top Neobanks in Colombia

During the last year, Nequis made 213,000 free transactions, 13,000 online payments and achieved 27,000 savings goals, making it the most popular Colombian neobank with the backing of Bancolombia.

Among its catalog of offers is a free Visa card, loans, money transfers, payroll payments for companies, payment services platform, alliances with means of transport, among others.

RappiPay : Through a Visa card without fees for annuities thanks to its alliance with Davivienda, it offers a cashback program that returns 3% of purchases in restaurants and 1% in other stores, send money instantly, interbank transfers free of charge, payment of services and much more.

Provides a dynamic QR that can be scanned by the establishment or a friend who needs to charge the user.

A 100% digital neobank will soon be incorporated into the financial system of Colombia Lulo Bank, the first in that country to be completely autonomous from a banking entity and which is expected to start in June 2021.

This virtual bank will enter with small deposits and credits in the first phase, in relation to loans it will have to adhere to national regulatory standards, such as not exceeding the usury rate with its interest rate.

Unlike Costa Rica, the Colombian market has been moving firmly towards legislation that allows a greater boom in the FinTech ecosystem. Currently, in our country this market is still under study without a possible law in the short term. Neobanks that have emerged have done so with the support of banking entities to be able to function within the framework of the law.

Antit is a company that has stood out in the FinTech ecosystem due to its focus on the development of FinTech products, with experience in the creation of four neobanks, payment gateways and much more.

Melissa López
August 6, 2021