The fintech industry has grown exponentially in the past decade, with $135.7 billion invested in fintech startups globally in 2019 alone. To build a successful fintech company, it’s crucial to have a solid infrastructure in place. Fintech infrastructure refers to the underlying technology and systems that enable financial services to be delivered to customers.
Building fintech infrastructure is a complex process that requires careful planning and consideration of various components. In this article, we will explore:
- Key components of successful fintech infrastructure
- Decisions that founding teams need to make,
- How to build Fintech Infrastructure
- Next generation of fintech infrastructure.
- Fintech infrastructure landscape and predictions for the future
- Fintech infrastructure-as-a-service providers.
Let’s dive in and learn how to build fintech infrastructure that can support your company’s growth and success.
How to build Fintech Infrastructure
Entrepreneurs need to take into account a number of important elements when creating fintech infrastructure. Let’s examine these components more closely and how they contribute to the development of effective fintech infrastructure.
1. Missional Vitality
Mission criticality is one of the key components of successful fintech infrastructure. This refers to the notion that the infrastructure should be made to support a particular, mission-critical use case. Companies can make sure that their infrastructure is configured to meet the needs of their customers by concentrating on a particular use case.
A company that is building infrastructure for cross-border payments should prioritize scalability and cost efficiency, for instance, according to a16z.
2. Narrowly Defined Methods
It’s crucial to have a first use case that is narrowly defined in addition to being mission critical. This means that rather than attempting to be everything to everyone, the infrastructure should be created to support a particular set of use cases.
Companies can make sure that their infrastructure is optimized to meet the needs of their customers by concentrating on a narrow set of use cases. This may result in higher customer satisfaction and retention as well as better scalability and cost efficiency.
3. Customers’utrality Should Be Increased
Neutrality across customers is another crucial component of a successful fintech infrastructure. This implies that the infrastructure needs to be made to support multiple clients without favoritism over the other.
Companies can avoid conflicts of interest and guarantee that all customers are treated fairly by remaining neutral across customers. This can aid in establishing customer trust and credibility, which can be essential for a fintech company’s success.
4. Pricing based on consumption
Last but not least, a consumption-based approach to investing in fintech infrastructure is advised. As a result, clients should only pay for the services they actually use rather than paying a flat fee for services they might not require.
Consumption-based pricing can help customers save money while also guaranteeing that the business can profit from its infrastructure. Both the business and its clients might win out in this way.
Recommended Lecture: Fintech Infrastructure Market Map
Developer-First or Business-First Buyers
When building fintech infrastructure, founding teams need to make a critical decision: whether to target developer-first or business-first buyers. Let’s explore the benefits and drawbacks of each approach.
1. Developer-First Buyers
Developer-first buyers are typically developers or technical teams who are looking for infrastructure solutions that can be easily integrated into their own products and services. These buyers are typically more focused on speed and ease of integration, rather than on brand recognition or customer experience.
Successful companies that target developer-first buyers include Stripe](https://stripe.com), Twilio, and [Plaid. These companies have focused on providing easy-to-use APIs and SDKs, as well as comprehensive documentation and developer support.
2. Business-First Buyers
Business-first buyers are typically non-technical teams who are looking for infrastructure solutions that can support their business needs. These buyers are typically more focused on brand recognition, customer experience, and compliance, rather than on speed or ease of integration.
Successful companies that target business-first buyers include Square, PayPal, and Affirm. These companies have focused on building consumer-facing brands, as well as providing comprehensive compliance and risk management solutions.
3. Benefits and Drawbacks
There are benefits and drawbacks to both approaches. Let’s take a closer look.
- Benefits of targeting developer-first buyers:
- Faster time to market
- Easier integration
- More technical feedback and insights
- Drawbacks of targeting developer-first buyers:
- Lack of brand recognition
- Limited customer experience
- Limited compliance and risk management solutions
- Benefits of targeting business-first buyers:
- Strong brand recognition
- Better customer experience
- Comprehensive compliance and risk management solutions
- Drawbacks of targeting business-first buyers:
- Slower time to market
- More complex integration
- Less technical feedback and insights
Ultimately, the decision of whether to target developer-first or business-first buyers will depend on the specific use case and goals of the fintech company. However, it’s important to carefully consider the benefits and drawbacks of each approach before making a decision.
Recommended Lecture: Why to invest in Venture Capital Fintech Latam
Speed or Scale: Optimizing for the Right Metrics for Fintech Infrastructure
When building fintech infrastructure, founding teams will need to decide whether to optimize for speed or scale. Let’s explore the benefits and drawbacks of each approach.
1. Optimizing for Speed
Optimizing for speed means designing infrastructure that can process transactions quickly and efficiently. This approach is typically favored by companies that are focused on providing real-time financial services, such as payment processing or trading.
Companies that optimize for speed include PayPal, Square, and Robinhood. These companies have invested heavily in building fast and reliable infrastructure, as well as providing real-time analytics and reporting.
2. Optimizing for Scale
Optimizing for scale means designing infrastructure that can handle large volumes of transactions and users. This approach is typically favored by companies that are focused on providing services to a large number of customers, such as banking or lending.
Companies that optimize for scale include Chime, LendingClub, and SoFi. These companies have invested heavily in building scalable infrastructure, as well as providing comprehensive risk management and compliance solutions.
3. Benefits and Drawbacks
There are benefits and drawbacks to both approaches. Let’s take a closer look.
- Benefits of optimizing for speed:
- Real-time transactions and analytics
- Improved customer experience
- Competitive advantage in fast-moving markets
- Drawbacks of optimizing for speed:
- More complex infrastructure
- Higher risk of errors or system failures
- Limited scalability
- Benefits of optimizing for scale:
- Ability to handle large volumes of transactions and users
- Comprehensive risk management and compliance solutions
- Greater scalability
- Drawbacks of optimizing for scale:
- Slower transaction processing times
- Less real-time analytics and reporting
- Less competitive advantage in fast-moving markets
Recommended Lecture: Why banks are buying Fintechs
4. Finding the Right Balance
Ultimately, the decision of whether to optimize for speed or scale will depend on the specific use case and goals of the fintech company. However, it’s important to carefully consider the benefits and drawbacks of each approach before making a decision.
In many cases, the optimal approach may be to find the right balance between speed and scale. This may involve investing in infrastructure that is both fast and scalable, as well as providing comprehensive risk management and compliance solutions. By finding the right balance, fintech companies can position themselves for long-term success in a rapidly evolving industry.
Branding: Consumer-Facing or White-Label?
When building fintech infrastructure, founding teams will need to decide whether to offer a consumer-facing brand or a white-label experience. Let’s explore the benefits and drawbacks of each approach.
1. Consumer-Facing Brand
A consumer-facing brand is a brand that is marketed directly to end consumers. This approach is typically favored by companies that are focused on providing financial services directly to consumers, such as neobanks or investment apps.
Companies that offer a consumer-facing brand include Chime, Robinhood, and Acorns. These companies have invested heavily in building strong consumer brands, as well as providing comprehensive customer experience and support.
2. White-Label Experience
A white-label experience is an experience that is branded with the name and logo of a third-party company. This approach is typically favored by companies that are focused on providing infrastructure solutions to other businesses, such as payment processors or lending platforms.
Companies that offer a white-label experience include Adyen, Marqeta, and Stripe. These companies have invested heavily in building flexible and customizable infrastructure solutions, as well as providing comprehensive developer support.
3. Benefits and Drawbacks
There are benefits and drawbacks to both approaches. Let’s take a closer look.
- Benefits of offering a consumer-facing brand:
- Stronger brand recognition and customer loyalty
- Direct customer relationship and feedback
- Greater control over customer experience
- Drawbacks of offering a consumer-facing brand:
- Higher marketing and advertising costs
- Greater risk of customer churn or dissatisfaction
- Limited flexibility for customization and integration
- Benefits of offering a white-label experience:
- Greater flexibility for customization and integration
- Lower marketing and advertising costs
- Greater potential for scalability
- Drawbacks of offering a white-label experience:
- Limited brand recognition and customer loyalty
- Limited direct customer feedback and relationship
- Greater competition from other white-label providers
4. Finding the Right Approach
Ultimately, the decision of whether to offer a consumer-facing brand or a white-label experience will depend on the specific use case and goals of the fintech company. However, it’s important to carefully consider the benefits and drawbacks of each approach before making a decision.
In many cases, the optimal approach may be to find the right balance between a consumer-facing brand and a white-label experience. This may involve offering a customizable and flexible infrastructure solution that can be tailored to the specific needs of each customer, while also providing a strong and recognizable brand that can help to build customer loyalty and trust. By finding the right approach, fintech companies can position themselves for long-term success in a rapidly evolving industry.
Recommended Lecture: How many fintechs are there in Latam in 2023
Consumption-Based Pricing: Aligning Value with Cost
When building fintech infrastructure, it’s important to align value with cost in an impartial manner. One way to achieve this is through consumption-based pricing. Let’s explore what consumption-based pricing is and how it can benefit fintech companies.
1. What is Consumption-Based Pricing?
Consumption-based pricing is a pricing model that charges customers based on their actual usage of a service or product. This is in contrast to traditional pricing models, which charge customers a fixed fee regardless of their usage.
Consumption-based pricing is typically used for infrastructure services, such as cloud computing or payment processing. It allows companies to align the value that customers receive with the cost that they incur, while also providing customers with greater flexibility and control over their costs.
2. Benefits of Consumption-Based Pricing
There are several benefits to consumption-based pricing for fintech companies. Let’s take a closer look.
- Alignment of value and cost: Consumption-based pricing allows fintech companies to align the value that customers receive with the cost that they incur. This can help to increase customer satisfaction and loyalty, while also ensuring that the company is fairly compensated for the value that it provides.
- Flexibility and control: Consumption-based pricing provides customers with greater flexibility and control over their costs. Customers can adjust their usage based on their needs and budget, which can help to reduce waste and optimize spending.
- Scalability: Consumption-based pricing can help to facilitate scalability and growth for fintech companies. As customer usage increases, the company can scale its infrastructure and resources to meet demand, without incurring significant fixed costs.
3. Drawbacks of Consumption-Based Pricing
There are also drawbacks to consumption-based pricing that fintech companies should be aware of. Let’s take a closer look.
- Complexity: Consumption-based pricing can be more complex to implement and manage than traditional pricing models. Companies need to track usage and bill customers accordingly, which can require significant investment in infrastructure and resources.
- Risk of revenue volatility: Consumption-based pricing can be more volatile than traditional pricing models, as revenue is tied directly to customer usage. This can create uncertainty and risk for fintech companies, particularly if customer usage fluctuates significantly.
- Lower profit margins: Consumption-based pricing can sometimes result in lower profit margins, particularly if customer usage is low or if the company incurs significant fixed costs to provide the service.
4. Conclusión
Consumption-based pricing can be an effective pricing model for fintech companies, particularly those that provide infrastructure services. It allows companies to align value with cost, while also providing customers with flexibility and control over their costs. However, companies should be aware of the potential drawbacks, including complexity, revenue volatility, and lower profit margins. By carefully considering the benefits and drawbacks of consumption-based pricing, fintech companies can make an informed decision about the pricing model that is right for them.
Recommended Lecture: Fintech driving financial inclusion to Latin America
Neutrality Across Customers: A Key Component
When building fintech infrastructure, neutrality across customers is a key component that should be considered. Let’s explore what neutrality across customers is and how it can benefit fintech companies.
1. What is Neutrality Across Customers?
Neutrality across customers is a principle that requires fintech companies to treat all customers fairly and impartially, regardless of their size or importance. This means that the company should not favor certain customers over others, or provide preferential treatment based on factors such as volume or revenue.
Neutrality across customers is important because it helps to ensure that the company is providing a level playing field for all customers, and is not unfairly benefiting one customer at the expense of others.
2. Benefits of Neutrality Across Customers
There are several benefits to neutrality across customers for fintech companies. Let’s take a closer look.
- Customer trust and loyalty: Neutrality across customers can help to build customer trust and loyalty. When customers feel that they are being treated fairly and impartially, they are more likely to remain loyal to the company and recommend it to others.
- Transparency: Neutrality across customers can help to increase transparency in the company’s operations. When the company treats all customers equally, it can provide greater visibility into its processes and decision-making.
- Compliance: Neutrality across customers can help to ensure that the company is in compliance with regulatory requirements. Regulators often require companies to treat all customers fairly and impartially, and neutrality across customers can help to demonstrate that the company is meeting these requirements.
3. Drawbacks of Neutrality Across Customers
There are also drawbacks to neutrality across customers that fintech companies should be aware of. Let’s take a closer look.
- Limited flexibility: Neutrality across customers can sometimes limit the company’s flexibility in responding to customer needs. For example, the company may not be able to provide preferential treatment to a customer that is experiencing a critical issue, even if doing so would be in the best interests of all customers.
- Lower revenue potential: Neutrality across customers can sometimes result in lower revenue potential, particularly if the company is not able to charge higher fees to larger customers.
- Greater complexity: Neutrality across customers can sometimes result in greater complexity in the company’s operations. For example, the company may need to implement more complex billing or pricing models to ensure that all customers are being treated fairly.
4. Conclusión
Neutrality across customers is a key component of successful fintech infrastructure. It helps to ensure that all customers are being treated fairly and impartially, and can help to build trust and loyalty among customers. However, neutrality across customers can also have drawbacks, including limited flexibility, lower revenue potential, and greater complexity. By carefully considering the benefits and drawbacks of neutrality across customers, fintech companies can make an informed decision about how to implement this
Recommended Lecture: Why Fintech in Latam? 8 reasons you need to know
Developer-First or Business-First Buyers: Which to Target?
When building fintech infrastructure, founding teams will need to decide whether to target developer-first or business-first buyers. Let’s explore the benefits and drawbacks of each approach.
1. Developer-First Buyers
Developer-first buyers are buyers who prioritize developer experience and ease of integration when evaluating infrastructure solutions. This means that they are more likely to choose infrastructure solutions that are well-documented, easy to use, and provide comprehensive developer support.
Companies that target developer-first buyers include Twilio, SendGrid, and Plaid. These companies have invested heavily in building strong developer communities, as well as providing comprehensive documentation and support.
2. Business-First Buyers
Business-first buyers are buyers who prioritize business value and return on investment when evaluating infrastructure solutions. This means that they are more likely to choose infrastructure solutions that provide measurable business outcomes, such as increased revenue or reduced costs.
Companies that target business-first buyers include Adyen, Marqeta, and Stripe. These companies have invested heavily in building flexible and customizable infrastructure solutions, as well as providing comprehensive business support.
3. Benefits and Drawbacks
There are benefits and drawbacks to both approaches. Let’s take a closer look.
- Benefits of targeting developer-first buyers:
- Stronger developer community and support
- Greater potential for adoption and word-of-mouth marketing
- Easier integration with other developer tools and platforms
- Drawbacks of targeting developer-first buyers:
- Limited focus on business value and return on investment
- Limited appeal to non-technical decision-makers
- Greater competition from other developer-first providers
- Benefits of targeting business-first buyers:
- Stronger focus on business value and return on investment
- Greater appeal to non-technical decision-makers
- Greater potential for revenue growth and profitability
- Drawbacks of targeting business-first buyers:
- Limited developer community and support
- Limited integration with other developer tools and platforms
- Greater complexity and customization requirements
4. Finding the Right Approach
Ultimately, the decision of whether to target developer-first or business-first buyers will depend on the specific use case and goals of the fintech company. However, it’s important to carefully consider the benefits and drawbacks of each approach before making a decision.
In many cases, the optimal approach may be to find the right balance between targeting developer-first and business-first buyers. This may involve offering a flexible and customizable infrastructure solution that provides measurable business outcomes, while also building a strong developer community
Recommended Lecture: Fintech Latam Investments in 2023
Building Successful Fintech Infrastructure: Key takeaways
Building successful fintech infrastructure requires a careful balance of mission criticality, a narrowly defined initial use case, neutrality across customers, and consumption-based pricing. It also requires a decision about whether to target developer-first or business-first buyers, and whether to prioritize speed or scale, and consumer-facing branding or white-label solutions. Let’s summarize the key takeaways from this article.
1. Key Components of Successful Fintech Infrastructure
Successful fintech infrastructure requires a careful balance of several key components, including:
- Mission criticality: Fintech infrastructure should be focused on a clearly defined, mission-critical use case that provides measurable value to customers.
- Narrowly defined initial use case: Fintech infrastructure should be narrowly defined in order to provide a focused and efficient solution to the initial use case.
- Neutrality across customers: Fintech infrastructure should treat all customers fairly and impartially, regardless of their size or importance.
- Consumption-based pricing: Fintech infrastructure should be priced based on actual usage, in order to align value with cost and provide customers with greater flexibility and control over their costs.
2. Targeting Developer-First or Business-First Buyers
Fintech companies should carefully consider whether to target developer-first or business-first buyers when building their infrastructure. Developer-first buyers prioritize ease of integration and developer experience, while business-first buyers prioritize business value and return on investment.
3. Prioritizing Speed or Scale
Fintech companies will also need to decide whether to prioritize speed or scale when building their infrastructure. Speed may be necessary to gain a competitive advantage, while scale may be necessary to support long-term growth and profitability.
4. Consumer-Facing Branding or White-Label Solutions
Finally, fintech companies will need to decide whether to prioritize consumer-facing branding or white-label solutions when building their infrastructure. Consumer-facing branding may help to build customer trust and loyalty, while white-label solutions may provide greater flexibility and customization options.
Fintech Companies Latam
UbankU
Defi bank focus on improving the financial inclusion for the GenZ. Financial industry doesn’t know anything about Genz and there´s a 2.5B billion market worldwide.
Ubanku, starts being the first step of the financial life for them, with a frictionless marketplace that can save money with a cashback of products and services of the university life, access to micro loans, all this, while they learn about finance, this allow us to create an innovating score system to connect GenZ with other financial products.
Creditop
Creditop is a loan aggregator that processes any credit request by centralizing lenders and connecting customers with their ideal loan.
We have disbursed +$7.5M in mortgages, car and personal loans with a profitable pricing model in each transaction.
Our mission is to improve life quality through credit efficiency in LatAm. Founders:
INI
Ini, a SaaS and white label fintech platform that allows any -wannabe fintech-company to scale their own payment network and expand their ecosystem into new markets and territories without losing the core focus of their businesses even when there is no connectivity access.
Inipay ́s IP tech (POS terminals + alternative connectivity) is also an enabler to reach new markets and niches such as events, concerts, stadiums, national parks, tourism and hospitality.
Aviva
Aviva is an AI startup following a unique approach to unsecured and productive credit for the underserved communities in Mexico.
Now imagine you are an unbanked person and all that you need to do for getting your first loan is having a face-time call. They have a great experience building Konfio (Mexican Unicorn). Founders:
Koban
A digital financial services platform for Bolivia, Paraguay, Ecuador and Peru; where the vast majority don’t have access to financial services or are drastically underserved by traditional banks.
Koban allows users to perform an array of financial services including online and offline payments, money transfers, budgeting tools and credit solutions, among other services for consumers and SMBs in the region.
Zenpli is an infrastructure focused SaaS working on putting a stop to the KYC and fraud challenge in LatAm.
Through 1-single integration, LatAm fintechs and other digital innovators seamlessly onboard more good customers by accessing best-in-class data across all domains and running accurate end-to-end identity decisions supported by advanced models that are hard to spoof.
We’re rolling our product with Mastercard in Mexico in Q4 2022 with the potential to generate ~500k in ARR over the next 12-months.
We’re backed by The Fintech Fund, Ralicap, Amador, Newtopia and world-class angels and advisors from C-level and VPs at Socure, EPAM, Konfío, R2 and Bureau.id.
Kashin
Kashin (YC S22) is Square with working capital for micro-merchants in LATAM.
We control risk with collaborative credit scoring and our vision is to become the primary financial platform for the masses.
Before Kashin, the founders led Cabify, the largest regional Uber competitor, and grew it from 0 to $50m in annual revenue.
Wibond
Buy now, pay later without credit cards.
WIBOND is a digital payment method to pay in small installments and without the need of a credit card.
It shows the best payment options according to each customer’s possibilities so they can enjoy their favorite products.
Tapi
Tapi is a Fintech B2B. Next-generation API-first network for billers, partners and their clients to re-envision the way bills get paid in LATAM.
Z1
Z1 is the Brazilian Gen Z neobank, where teenagers and young adults can begin their journey to financial independence.
Through Z1’s banking app, users can send and receive money from parents, employers or clients from their side gigs, as well as spend the money through a physical and virtual card.
Botin
BOTIN is an investment super app and a one stop shop to trade traditional and non-traditional assets; its vision is to make the wealth generation tools of the 1% available to all.
Through its Neo broker stock trading app gives users a simple and direct access to invest in different assets across multiple industries and territories (e.g., ETFs and stocks from USA, real estate, crypto, tokens, and others).
BOTIN is focused in helping 300 million people in Spanish speaking Latin America to protect their savings and have an option for retirement.
Yuno
YUNO wants to bring to Latin American companies an easy online checkout solution that solves the pain point of managing multiple payment methods, as well as fraud detection tools, which can be costly and painful to manage.
How do you build Fintech Infrastructure FAQs
Who should target developer-first buyers when building fintech infrastructure?
Fintech companies who prioritize developer experience and ease of integration.
What are the key components of successful fintech infrastructure?
A mission-critical use case, a narrowly defined initial use case, neutrality across customers, and consumption-based pricing.
How do you decide whether to prioritize speed or scale when building fintech infrastructure?
Consider whether speed or scale is necessary to gain a competitive advantage or support long-term growth and profitability.
Who should target business-first buyers when building fintech infrastructure?
Fintech companies who prioritize business value and return on investment.
What is the importance of neutrality across customers in fintech infrastructure?
Neutrality treats all customers impartially, regardless of their size or importance.
How do you decide whether to prioritize consumer-facing branding or white-label solutions?
Consider whether consumer-facing branding helps to build customer loyalty or if white-label solutions provide greater flexibility.
