Open banking is a buzzword that is gaining traction in the financial industry today. This concept allows traditional banks to share data and create new services by utilizing APIs to modernize their systems. The most significant progress in open banking has been seen in developed economies, where the majority of consumers and businesses already have bank accounts, are familiar with digital transactions, and are open to trying new approaches that can save them both time and money.
However, despite the slow adoption of open banking in even the most advanced markets, some are betting that the real potential for these new services lies in emerging economies.
One startup that is leading the way in open banking in Latin America is Prometeo, based in Uruguay. The company has recently secured $13 million in funding to expand its business in the region. While the startup has not disclosed its valuation, it is estimated to be valued at around $100 million following this Series A round.
Prometeo, founded in 2018, has shown significant growth with relatively lean funding. Prior to this round, the company had only raised approximately $6 million. Co-CEO and co-founder Ximena Aleman, who has previously worked as a journalist covering the media and tech industries, believes Prometeo is taking a unique approach towards growth, much like its CEO’s unlikely roots.
While many open banking initiatives focus on national rollouts, Prometeo is tackling the Latin American market as a whole. The company uses a single API to connect with over 350 channels across 283 financial institutions in 10 countries. Brazil and Mexico are currently its two largest markets, as well as being the leading fintech regions in the area. Prometeo’s most popular services include account-to-account payments and validations, as well as cash management for businesses. Co-founder Rodrigo Tumaián shares the CEO title with Aleman.
The company’s plan is to continue onboarding new users, expand its range of services, and grow into other geographies. According to Aleman, Prometeo’s revenue has increased by 10 times in the last two years, although the exact numbers remain undisclosed.
However, it’s undeniable that open banking in the Latin American region comes with its fair share of challenges. Overall, the financial services in the region lag behind more developed markets like Western Europe and the U.S. For instance, the estimated bank account penetration in Latin America is around 70%, which is showing growth but still far from the high 90+ percentages in other markets where open banking has taken off.
Aleman admits that there is still a lot of room for improvement in terms of financial inclusion, with the majority of businesses and consumers relying on cash-based transactions for their daily needs.
On the other hand, this also presents an opportunity for companies like Prometeo. In more established markets, the widespread use of existing payment rails, specifically those run by major credit networks like Visa, is one of the biggest competitive barriers. However, in Latin America, these challenges are significantly smaller. This belief is shared by other companies, such as Ivy, which raised funding specifically to expand into the region, and Finerio, an ambitious open banking startup from Mexico, which Christine extensively wrote about here.
The investors backing Prometeo in this round reflect not only the interest in growing their business in the region but also in how open banking can help them achieve that. Antler Elevate, a firm with roots in Asia Pacific, is leading the round, with PayPal Ventures, Samsung Next, DN Capital, Cometa, and Magma Partners also participating.
While PayPal and Samsung Next are not currently working with Prometeo on services, their backing of the startup is a strong signal of their intentions and interests in the region. PayPal has been investing in local startups in Latin America for years, with its biggest investment being $750 million in marketplace MercadoLibre back in 2019. The company has also led a $14 million round in nocnoc, a specialist in cross-border commerce in the region, and owns Zettle, a point-of-sale payments company that has made significant inroads in Latin America over the years.
Samsung, on the other hand, is the largest mobile phone vendor in the region, with a market share of over 40%. In both these cases, there is a clear interest in establishing key partnerships and securing an early seat at the table in a sector with potential for significant growth in the future. Digital and mobile wallets, which both companies are investing in, are still a small part of the commerce landscape in Latin America, accounting for only 10% of all transactions as of 2020.
However, the progress made by Prometeo so far and the interest from major players in the banking industry in the region, such as Citi, Santander, JP Morgan, Vtex, and many local players, has caught the attention of investors.
Partner at Antler Elevate, Fady Abdel-Nour, stated, “Prometeo, with its simple single API, provides banks and financial institutions access to payments and data throughout the entirety of Latin America. We are excited to partner with Ximena and Rodrigo to build a company that’s not just advancing technology but also empowering businesses to reach new heights of success.”
