There are some areas of the industry that have been becoming more dynamic, generating disruptive products and services that are accelerating the combination of technology with traditional financial platforms to achieve innovation and make transactions, investments, access to financial products and services much simpler. It is precisely here where we will find companies that develop services that combine technology and financial services in an efficient, practical, and – arguably – economical way. These companies are known globally as FinTech. Jason Simon, an expert in FinTech and eCommerce, explains in detail the digitization of services, and what role FinTech plays today.

FinTech can be defined as technology-enabled innovation in financial services that is resulting in new business models, applications, processes, or products with an associated material effect on the provision of financial services. In Latin American countries, such as Costa Rica, the National Payment System (Sinpe) was implemented, which is used to conveniently make interbank transfers or payments through cell phones. This has promoted the digitalization of a large part of people’s own economies and they may not have noticed it. There are even voices that claim that the colon is practically a “digital currency” thanks, in part, to Sinpe’s services.

Additionally, it is possible to find today in Costa Rica elements of an ecosystem that, although it is far from complete, has been growing in recent years through the emergence of alternative payment systems (Impesa or Kipo), digital wallets (Wink), crypto-assets (Nimiq) or parking payment wallets through geolocation (Parso). All these aforementioned cases are currently operating and, in a way, threaten the way people perform some of the most common economic activities. It is for this reason that they are known as disruptive technologies.

“It is not surprising that, during the economic and health crisis caused by the pandemic, different initiatives emerge that are increasingly innovative, user-friendly and take on functions that we normally did in a physical, analog and – to a certain extent – cumbersome way,” says Simon.

According to different publications, in the next 12 to 24 months, Costa Rica could expect mostly digitized banking, the penetration of blockchain in the global financial industry and artificial intelligence (AI) as a natural component for financial institutions. It will also see an intensification of FinTech regulation, innovations in payment methods (using contactless modalities, mobile technologies, identity verification, etc.), partnerships between traditional banking entities with new digital start-ups to survive by offering innovative and traditional services and the emergence of dilemmas that, without proper management, can either transform the FinTech industry into a tool for financial inclusion or increase the marginalization of some sectors of the population from access to the necessary financial services.

“We must become increasingly familiar with projects that emerge from collaborative economies, for example, new crowdfunding platforms to finance all kinds of public and private initiatives to applications for peer-to-peer lending, which will directly connect users in credit operations bypassing costly intermediaries. We can make a lot of guesses, but the ramifications that new technologies can lead to are virtually endless,” says Simon.

A core factor is to give confidence to current and future users of digital platforms or applications that offer FinTech services. In other words, supervisory agencies must be trained and empowered, starting with consumer rights defense entities, since they must be able to provide answers and solutions in cases of disputes or non-compliance by FinTech companies.

“It is also necessary that the new FinTech companies that emerge can make up for some of the shortcomings evidenced by traditional entities in terms of security and identity verification for users,” Simon asserts. “In Costa Rica, for example, traditional financial institutions have not provided a sufficient response to many users who have experienced security breaches in their accounts, resulting in scams and other financial losses.”

On top of this, the response of the entities to resolve these disputes is not necessarily quick and satisfactory for customers. The coming months will be vital in the meteoric FinTech industry and many countries should seriously consider engaging with the technologies that are trending in the most developed jurisdictions on the planet.