Em Conversa: Promoting the Fintech markets across Brazil with Torq

Em Conversa tries to uncover the secrets of Latin America (LatAm) which has caused fintech market to boom, from being worth less than $50 million in 2016, to $2.1 billion in 2022. Thiago Iglesiasmanager of portolio at Torqthe open innovation center and corporate venture capital of the Brazilian financial software giant Sinqia spoke to Fintech Times on how the Brazilian fintech market can be accelerated.

In March 2023, Torq launched the Fintech Innovation Challenge Crossborder Payment, an initiative that aims to bring to Brazil technological solutions for international payments developed by startups from London and its surroundings. When it comes to fintech innovation, the UK and Brazil are two peas in a pod – there is great synergy between the two countries. You only have to look as far as open banking’s development to see how they work together.

To gain a greater understanding of how capital is invested in fintech in the LatAm giant and how the sector’s development is being accelerated, we sat down with Thiago Iglesias, head of portolio at Torq. With over 10 years of experience in fintech, Iglesias analyzed fintech trends in Brazil.

Can you tell me more about the company and your role in it?

Torq is the open innovation center and corporate venture capital of Sinqia, a technology company in the Brazilian financial market. We supply technology to banks, funds, pensions, consortia and digital service lines, among others. Torq works with open innovation, focusing on building an ecosystem that generates innovation outside of Sinqia. We also have a Corporate Venture Capital initiative that invests in startups linked to the financial services of the future.

My job is to look at initiatives that drive innovation in the company, but also connect with external partners. At Torq, I am the manager of the portfolio, responsible for managing the partnerships with the startups we invest in. We have more than 100 invested startups, including direct investments and indirect investments via partner funds, accelerators and other players.

What are some fintech innovation trends we are seeing in Brazil?

Brazil’s moment is different from the stage in which other global markets find themselves. Currently, the conversation about open finance and how to bring this technology to our country is at an all-time high. We understand how we enable easier access and greater ownership of the user’s data, and create value for the customer in the process. We are in the process of launching a venture for the pension market where it will be possible to allow greater portability of pension contracts via open finance.

There are also other trends. We are beginning to see initiatives related to blockchain and decentralized finance, which seek to improve the efficiency of technologies used in the back office of the financial sector.

The idea is to bring efficiency to the national economic logic systems. The central bank itself has Real Digital, which introduces blockchain and other technologies that seek to improve the traffic and navigation of money in the Brazilian digital environment. Access to credit is also a complex issue in the country, so credit fintech is always on the rise – there are many opportunities in this sector.

What is Torq doing to improve innovation in Brazil and LatAm?

Financial investments are an important point. We invest in startups that bring new technology to the region. But more than that, we work on open innovation with these startups. The connection between these companies with Sinqia, the largest technology player in the country, provides enormous access to the Brazilian financial market, often directly to the customer.

We have a huge customer base, more than 700 players, and this direct connection facilitates the development and improvement of technologies and products. We have several events across the country where we share knowledge and create connections. In addition to São Paulo, where most of the innovation initiatives are concentrated, we have already held events in Recife, Florianópolis, Belo Horizonte, Curitiba, and this year we have planned events for three other cities.

How do innovation trends in Brazil compare to those in the rest of the world?

Brazil is a little behind in terms of the most important innovation and technology players in the world. There are many technologies that we still need to develop, but there are other areas, such as the agro sector, where there is a lot of Brazilian investment, which encourages growth and the birth of new startups that promote new technologies to these sectors.

However, the financial market is different. Since each country has its own rules, it is difficult for startups to navigate between countries. The Brazilian payment method Pix (instant payment system), for example, brought a great technological innovation, but ended up hindering many startups that developed solutions for this problem.

Today we are already looking at an International Pix, so we want to anticipate this global movement that already exists in open finance and open banking. We envision a future in finance where transactions take place more fluidly between different countries.

There is also a strong focus on services, with startups looking for solutions for the low-income population on how to provide access not only to the capital, but to a more dignified life. Education is also a strong sector in the country, many edtechs are developing plans focused on this public. This is a Brazilian differential.

What are some unique challenges related to the region/country when it comes to innovation?

An inherent challenge in Brazil, regardless of innovation or not, is the size of the country. We are talking about a continental country, with very different regions and audiences. Especially when it comes to technology, access to good and stable internet can be problematic. Often it ends up that products that make a lot of sense for a given location are based on technologies that do not work in the region, especially when we are talking about the countryside.

The bureaucracy in the country is also complicated, although it has improved a lot recently. The tax part is also a big challenge, there are many taxes and an overly complex logic behind them. Fortunately, there are legislative proposals that work to simplify these processes.

The level of education is also another challenge. We are a country with a suboptimal level of education, so the conversation about technology and innovation does not always reach people who want to benefit from these ideas.

Plans for the future (road map and growth plan)

We have already consolidated the strategy of maximizing the value for Sinqia with our portfolio of startups and open innovation initiatives, enabling the generation of revenue for the company itself and for its customers. Now our challenge is to bring the innovation to the financial sector as a whole. The aim is to generate value and create synergy for companies that permeate or relate to the financial market.

Not so much depending on Sinqia, but relying on other partners and players who enable different projects and visions for the market. The secret is to generate value not only for the startups in our portfolio, but also for ecosystem partners.

Final thoughts

We are experiencing a complex moment in the market. We have seen low investment figures compared to what we had in previous years, both in venture capture and in startups’ own projects. The market’s current focus is on efficiency, on cleaning up the house and creating a scenario with less cash consumption and faster breakevens, which will facilitate the process of investment rounds. This can be healthy for the market, changing the landscape of stretched valuations and focusing on future profits and returns for the investor.