What are the differences between fintechs and startups?

The term “startup” is already quite popular out there and its general understanding as well, but other terms from “startupês” are still slowly assimilated. One of them is “fintech”. Roughly speaking, a startup is an innovative business model with scalable sales capacity, that is, it can exponentially increase its revenue over time without increasing expenses in the same measure. A fintech is basically a startup focused on offering financial services.

The sector is one of the most powerful in the startup market. Together, Brazilian fintechs raised US$ 1.9 billion (R$ 10 billion) in 2020, according to data from the open innovation platform Distrito. The value surpassed the results of 2019, which were US$ 1.1 billion (R$ 5.8 billion). A common example of fintech is Nubank, probably the most popular startup in Brazil, which fell in favor with the public with its credit card with free annuity, in addition to its agile and efficient service almost entirely via app.

Other good examples of Brazilian fintechs are

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Ame Digital: payment and cashback platform;

Brex: corporate credit cards;

Simple Account: checking account, expense management software and corporate cards;

Credits: low-rate lending platform;

Ebanx: Payment that connects consumers to global companies such as Uber and Spotify;

PagSeguro: payment platform and machines;

PicPay: payment platform;

Stone: payment platform and machines; Zoop: offers a platform for companies to create payment methods.

The sector is also a leader in the number of unicorns, nickname of startups with at least US$ 1 billion (R$ 5.2 billion at the current price) in market value. Of those mentioned above, Nubank, PagSeguro, Brex, Ebanx, Stone and PicPay have already reached this level.

Image: Reproduction/Alexander Mils/Pexels

Characteristics of a startup

Innovative: it does not follow a traditional business formula, already tested and approved in the market. Instead, it seeks new ideas, products and solutions to problems that are still open; Scalable: As stated above, a startup model allows you to expand production and delivery without increasing costs. If the model is successful, it will offer a quick return on your initial investment; Repeatable: Work can be repeated at scale for different customers, without having to create different copies of the product for different customers. For example, instead of selling a music CD to each consumer, streaming audio stores the songs on the server and serves millions of people; Uncertain: as they enter unexplored or unpublished markets, it is a business that offers more risks; Flexible: has the ability to change your business model if the original does not prove profitable, after testing your hypothesis (the idea that gave rise to the business) and noticing other needs of your customers. This ability to quickly change strategy is called “pivoting.”

Features of a fintech

More technology: many of them do not have physical assistance; everything is done or by the app’s chat. Other channels are telephone and email Less bureaucracy: also thanks to technology, it allows the documentation to open an account to be completely digital, such as sending a photo with a selfie and a document in hand to prove the customer’s authenticity. Tools like digital recognition are heavily used to streamline the process; Low operating cost: technology also makes fintech’s operation cheaper, which can rely on small and specialized teams to serve a massive number of customers; Advantageous services: it offers unique financial solutions or at lower rates than those practiced by conventional banks and finance companies. Again Nubank is an example, with its recent investment funds and premium card; They aren’t banks yet: a disadvantage of them for a big bank is that they don’t have everything. For example, you cannot make savings accounts at Nubank or PagSeguro. Another weakness: the account is not a checking account, but a payment account. You can even withdraw cash at ATMs, but a fee of R$ 6.50 is charged for each withdrawal, by decision of the National Monetary Council.

Is there a difference between startup and fintech?

If you’ve read this far, you already understand that, in short, every fintech is a startup — or at least it started as one, until the business escalated and it became a publicly traded company or was bought by a bigger one. But not every startup is fintech: if it focuses on other sectors, such as food, education, real estate, etc. so they are not fintechs, but foodtechs, edtechs, protetechs and so on.

Source: Fintech.com.br, Nubank, Flint

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