Speed ​​of change and the Fintech integration in the Retail sector

4 min readSep 30, 2020

In recent years, the fintech revolution has accelerated around the world, transforming how people, companies and governments interact with financial services. Developed and Emerging Markets have been no exception. This year, besides, COVID-19 has particularly impacted applications focused on the retail industry.

Globally, there are 66 fintech unicorns valued in aggregate at approximately USD$250 billion, according to CBInsights. The U.S. contributes to the list with 37 of them (ej. Stripe, Ripple, Robinhood, Toast), Asia with 12 (ej. PayTM), Europe with 12 (ej. Revolut, Klarna), Brazil with 3 (ej. Nubank) and Australia with 2 (Airwallex).

How is this favorable investment landscape for fintech related to the retail sector?

The term Embedded Fintech or Embedded Finance refers to the value proposition for non-financial companies that improve or transform their processes, products or services or business models through the association of financial products.

The retail sector, like the financial sector, has experienced high digitization in recent times. The pandemic has accelerated this digital transformation; for example, sales of Ocado (online supermarket in the UK) in recent months have increased by more than 42%. This change shows some financial elements used by the sector:

-Physical trade. Despite social distancing, the need to go to physical stores to buy persists. In addition to the hygiene protocols imposed under the guidance of government authorities, many establishments are implementing and favoring contactless means of payment. Today the traditional banking system and fintech companies use QR code (Quick Response), a technology developed in Japan in the mid-1990s, which became popular for mobile payments, especially in China. There are also other means of payment on the market with NFC (Near Field Communication) technology, biometrics and ultrasound.

-Fintech enabler. Traditional businesses, especially convenience stores or neighborhood stores, are being financially digitized with points of sale that enable them to receive other means of payment and to carry out any other type of transaction, such as payment for services (eg. water, electricity , telephone, etc.), deposits and withdrawals from bank accounts and even payment of remittances. Also, through fintechs or traditional banks, traditional businesses can open deposit accounts for customers. One of the recent options is the ability to purchase medical microinsurance at a convenience store.

-E-commerce. Due to current mobility restrictions, online consumption has increased. Many startups are taking advantage of this situation to accelerate their growth, as is the case of companies operating in Latam such as Chiper, Frubana, Justo, Merqueo, Quqo, among others. These applications require payment processing on digital platforms, which is why they connect with fintech solutions to have that capacity. Thus, the growth of digital applications will have a positive effect on fintech.

-E-commerce loans. The increase in e-commerce transactions has opened the door to online financing. Some applications offer a loan when making the payment online. These applications use technology to determine consumption patterns and instantly perform credit risk analysis and determine potential financing. In the United States, companies like PayPal or Sezzle provide this financing.

Without a doubt, fintech companies are enabling all traditional or online trading players to become a relevant part of the financial ecosystem. In this sense, it is important to introduce and improve the offer of financial products to expand your market in users and segments. The objective is to increase the flow of physical or online users to, consequently, increase the sale of products and services, as well as have an additional income from financial products. Besides, the competitiveness of the business grows and makes it more profitable. On the other hand, all physical establishments have the potential to become a bank correspondent. Location is a priority and customers need more services or financial technology every day.

Today fintech companies are fully integrated into different industrial sectors such as retail. In the following years, digitization will be greater and the scope of this relationship will be more relevant; companies shouldn’t wait for fintech to eat up their business.

“Ignoring technological change in a technology-based financial system is like a mouse starving because someone moved its cheese” — Chris Skinner

Note: please refer to the original publication at EL CEO: https://elceo.com/opinion/velocidad-de-cambio-e-integracion-del-sector-fintech/

Written by:

Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund.

Ricardo Latournerie. Investment analyst at ACV.

ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.

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ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.