As we start to navigate this new year, the financial technology sector stands on the brink of unprecedented change. The fintech landscape, having rapidly evolved from traditional banking to innovative digital solutions, now faces a pivotal year. What will 2024 bring to this dynamic industry? To explore this question, we delve into an insightful conversation with Eduardo Martinez Garcia, the co-founder and CEO of Toqio. A key figure in the fintech revolution, Eduardo shares his expert insights on emerging trends such as embedded finance, AI, and machine learning, and their significant impact on the future of financial services.
In this interview, Eduardo discusses the current state of the fintech industry, the integration of advanced technologies in finance, and the evolving roles of traditional banks amidst these technological advancements. He also sheds light on the critical importance of regulatory compliance in a rapidly changing landscape. His perspectives not only provide a glimpse into the current state of fintech but also offer valuable foresight and guidance for aspiring entrepreneurs and businesses navigating this dynamic sector.
Join us as we explore Eduardo Martinez Garcia’s vision for fintech in 2024, uncovering the challenges and opportunities that lie ahead in this transformative year.
Could you walk us through your journey and experience in the fintech industry and how that led you to co-found Toqio?
I founded Toqio with Michael Galvin back in 2019. We had already worked in the finance and technology sectors for quite some time as we built together Geniac. This SaaS platform helped small businesses in the UK manage their day-to-day administrative activities, such as accounting, legal, and HR.
After we exited the business, we found ourselves being pulled towards fintech. We realised that the emerging fintech market heralded a massive change in banking and financial service paradigms, leading us to become champions for democratising digital finance. In particular, we wanted to bridge the gap between SMEs and financial institutions we first spotted while building Geniac.
It’s difficult for SMEs to access the right financial products at the right time, and financial institutions struggle to offer financing to SMEs due to a lack of data that can help analyse risk profiles. Fixing this disconnect is a key driver for building Toqio.
Together, we surrounded ourselves with a core team of expert professionals and began to develop the Toqio platform as a simple and cost-effective SaaS alternative to complex and costly in-house fintech development projects. The SaaS model had already proven to be incredibly successful on the market in terms of CRM, CMS, and communication systems, so fintech was the next logical space for us to explore.
For those who might not be familiar with what unique perspectives or strategies Toqio brings to the table in the field of embedded finance?
Toqio is an embedded finance platform that makes creating and integrating financial services simple. Instead of wasting time and money building something in-house, Toqio offers a quicker, cost-effective way to embed financial products. With Toqio, you can bring your concept to market in just a few weeks, saving considerably on development, maintenance, and personnel costs.
Toqio is focussing on SMEs, whether that’s by working with the corporates who want to reach them or corporates who work closely with SMEs, as clients, channels to market or suppliers. We bridge an important gap by working with corporations, financial institutions, and SMEs. Corporates are empowered to act as financial distributors of financial products, such as payments and lending, to their ecosystem of SMEs. This could be franchises or corporates selling to or through retailers (such as food & beverage companies, supermarkets, or pharmacies), to corporates selling or distributing their products directly to SMEs (such as TelCo).
The platform’s modular approach means companies can customize solutions without having to delve too deeply into technical details. Most features, in fact, can be toggled on or off with the flip of a switch. Companies can start with a no-code build for speed and enhance features as they grow in a low-code environment. Toqio provides numerous advantages, including an easy-to-use administrative platform, the elimination of delivery risk, extensive UI and workflow customization options, bank-grade security and compliance, and the ability to integrate disparate corporate systems in order to orchestrate them all from one place.
How do you envision the evolution of embedded finance in the corporate sector in 2024?
In the ever-changing world of financial services, corporate-embedded finance is taking centre stage as we swiftly approach 2024. This dynamic concept is poised to undergo steady and significant transformations over the next few years.
Since embedded finance refers to the digital process of integrating financial services into non-financial products and services, everything digital moves at breakneck speed; it will ramp up in 2024. Corporate-embedded finance platforms will play a key role in this growth, enabling businesses to embed financial services into their own offerings quickly and easily. All the reports published on the topic thus far have said the same thing: the success of embedded finance in the consumer space will carry over into the B2B arena and be worth trillions of dollars.
Corporate embedded finance will get fairly close to becoming an industry norm – in fact, 2024 will be the year of embedded finance technology. It’s the year we’ll see new tech and regulations change what we know about how the sector operates. It’s the year corporates will truly become banks, or at least bank-like. It’s the year smaller companies will look to trusted, larger partners for financial guidance and support. The year will end with corporations having recession-proofed their revenue streams through diversification. It’s the year where we’ll see corporates capturing new revenue by offering financial solutions throughout their operations.
What regulatory changes do you anticipate in the fintech industry, and how might they impact embedded finance?
As the fintech industry grows, regulators are taking a closer look at it. This has led to increased industry regulation in recent years, which is expected to continue. Much of this concerns the missteps of several financial service providers over the last couple of years. Embedded finance platforms will need to comply with these new regulations to ensure that nobody can take advantage of the great tools being produced.
How we see corporates delivering embedded finance differs from what we have seen to date. They care about the services they provide, their network and their reputation. They do not want to become banks or regulated entities hence, they will only work with regulated institutions that are capable of offering their services in a very efficient way while keeping the regulatory duties, and indeed, playing on the safe side due to the impotence of reputation.
Can you discuss the potential role of AI and machine learning in shaping the future of corporate embedded finance?
Several emerging technologies, including artificial intelligence (AI) and machine learning (ML), will slowly enter the embedded finance space throughout 2024. We can expect to see increased adoption of these technologies by corporate embedded finance platforms and other fintech companies.
Tentative steps have already been made, but the serious consequences of issues arising from implementing these sorts of technologies have made those integrating them trepidatious, to say the least. Both AI and ML are yet to be seen in corporate-embedded finance. That’s mainly because integration, especially concerning lending, will be all about data collection and how to analyse the information extracted. When linked to data science, those two technologies will, therefore, be key differentiators in the future.
In what ways do you see financial inclusion being addressed through fintech innovations in 2024?
Financial inclusion aims to make financial services accessible and affordable to everyone. In the upcoming year, we expect to see corporate-embedded finance platforms focus more on the topic. This will involve developing new products and services specifically designed to reach the people who need them most.
More specific to the business sphere, “affordability” will become a heavy focus for brands to increase customer loyalty in both the B2B and B2C spaces. Brands will seek to offer customers and partners more financial product options when banks will not or cannot engage, such as turning down a loan based on traditional scoring methodologies or opening up lines of credit in light of restricted cash flow.
SMEs are the hardest segment to finance and yet represent about 90% of businesses and more than 50% of employment worldwide. Toqio is helping to finance many sole traders and small businesses – a huge part of financial inclusion. In many instances, these businesses are created by minority groups, making it even harder for them to access finance – or they are in countries where access to data and risk analysis makes it harder.
How might traditional banks adapt to the increasing prominence of embedded finance in the corporate world?
Incumbent banks have demonstrated their staying power and adaptability time and time again, mostly due to being able to leverage their size and relative dependability. Banks are finally recognizing the need to adapt to changing customer expectations and digital transformation, especially as embedded finance matures and larger corporations embrace the concept.
Large companies are becoming the new disruptors. Banks have started scaling back their innovation because of market speculation and the spectre of possible collapse. Competition will become even more significant as the nature of a disruptor changes from a fintech to an empowered corporate entity. The future of core banking is likely to strike a balance between fintech-driven companies and incumbents. While large financial institutions will endure, their role is evolving. Their strengths are assessment, management, and specialized services. We’re already seeing them pivot toward analyzing data from a multitude of sources, diving into data lakes to provide genuinely useful risk assessments.
Throughout 2024 we’re going to see a conscious and guided re-creation of the finance sector, a full terraforming of the terrain to create something that flourishes, with incumbents, fintechs, and companies all seeking to find their niches in the ecosystem. Corporate-embedded finance will be a massive part of the upcoming shift.
What are your thoughts on the future balance between fintech-driven companies and traditional financial institutions?
We will see more collaboration, not only between platforms like Toqio, which enable corporates to create and orchestrate financial products from their own and others, but also between regulated entities that bring their competitive advantage into a complex proposition.
Traditional institutions will have to switch their standard approach of delivering their products directly to customers to start working with other partners and corporations to distribute their products through different channels and brands.
How will emerging technologies influence risk assessment and management in finance?
We will see artificial intelligence (AI) being used for payment fraud detection, analysing payment patterns, and tracking payments across regulated entities and international transfers using the traditional version of AI with machine learning algorithms.
Furthermore, payment companies implementing distributed network technologies will greatly expand the ability to access data and information from various providers, enabling improved AI capabilities. This will enhance fraud detection and orchestration capabilities so businesses can better safeguard against cyber threats and make more informed decisions. This technological advancement paves the way for a more secure and efficient digital landscape.
Finally, by leveraging generative AI technology, we have found it highly beneficial in various areas such as customer support, customer communications, and initial problem-root analysis. Additionally, there is potential to replace specific basic development functions with generative AI results, enhancing and bolstering our overall development capabilities.
How do you see smaller companies leveraging embedded finance technologies to enhance their financial services?
Through corporate distribution. We will see corporates creating and disintermediating new and more sector-specific products that would help them improve and leverage their data (corporate data) to minimise risks and understand needs.
What are the key strategies you believe will help companies recession-proof their revenue streams through fintech innovations?
Corporates have realised that they must add more products and services to remain competitive.
By creating new embedded finance propositions, not only can they create new revenue streams, but they will also improve current sales by increasing retention. With a clearer understanding of their distribution channels, they can help them improve, resulting in more sales.
Just to finish this conversation, what advice would you give to aspiring entrepreneurs, especially those looking to enter the Fintech sector in 2024 and beyond?
We are at an inflexion point. In the past, successful Fintech projects were mainly Challenger Banks and B2C propositions, and a few early B2B projects have proven hugely successful. New regulatory constraints have slowed this market down, also allowing some market consolidation.
However, the B2B Fintech evolution has not stopped as a result. On the contrary, new models, more secure and scalable, have emerged, and clearer and more tangible opportunities have been identified, with some success cases to back them up. We will see the B2B market growing fast over the next two years, with large-scale projects between Large Corporates and SMEs changing the way financial services have been provided to date.
