Niche fintechs: The future of finances is built through inclusion and innovation
9 minutes reading
Niche fintechs are today one of the most solid trends in the payments market and banking – and one of the main ways toFinancial inclusionin Latin America. But what, in fact, characterizes a niche fintech? What are the advantages of working with this model and who can benefit from this solution?
Going to the bank, opening an account, requesting a credit card, talking to a manager to ask for a loan: Those actions are part of many people’s routine, but not everyone realizes that what seems common for some individuals actually hides a few challenges for significant parts of the population—especially in developing countries such as the ones in Latin America.
Trouble accessing bank branches for people living in the countryside or rural areas, high fees, solutions that are inadequate to the consumer profile or even excluding for their socioeconomic situation, difficulty in making financial transactions for professionals who are constantly in transit: Those are some of the common examples that still limit banking for the population.
Many of these challenges, of course, have already been minimized by the advancement of digital banking. Proof of this, in Brazil XNUMX out of XNUMX people have accounts in this type of institution (Zetta). Furthermore, from January XNUMX to June XNUMX , XNUMX million Brazilians opened their first account (Central Bank).
So what is the next step for accelerated financial inclusion if digital financial solutions are already highly available for the most common issues? The answer: Challenges that are specific to certain user profiles—whether they’re natural or legal persons.
That’s where niche fintechs come in!
In this article, we’ll discuss some of the existing business models, as well as introduce the main opportunities for fintechs choosing to dedicate to that type of operation. Check it out!
What does it mean when we refer to niche fintechs?
Niche fintechs are institutions that work with highly specific segments in the industry, while also having common characteristics in that business profile—such as being 100% digital and offering financial solutions at more affordable fees.
They’re businesses which have observed invisible challenges, listened to different audiences—that is, different niches—than the ones targeted by traditional banks and other fintechs having more comprehensive operations. That’s why they have decided to provide solutions that are specific to those people or businesses.
The actual nature of niche fintechs promotes a closer, more organic bond between the financial institution and their customer,, since the foundation for that bond is their common values, their unique solution offering, and their customized service according to each customer’s needs.
So not surprisingly, some niche fintechs have partnered with social initiatives and NGOs aligned with the intitution’s values: For many of them, the main goal is not driving profit, but actually making money flow within communities using the services provided.
In other words, niche fintechs focus on microeconomics, rather than macroeconomics.
Main opportunities for institutions working with niche markets:
- Potentially becoming the user’s preferred financial institution, with high loyalty and solution usage rates;
- Developing a market where there’s less competition with other players;
- Potentially operating by partnering with other companies and organizations dedicated to a specific customer profile;
- Having more room for innovating in solutions, rather than competing with traditional institutions.
Niche fintechs in action: Learn about some examples
The focus on micro and segmentation means that niche fintechs are more than just banking, since the great differential of these companies is not in the financial products offered, but way as these products are offered ― and for whom they are offered.
And as we’ve seen in the industry, those users can be grouped based on a variety of characteristics and behaviors. We’ve observed niche fintechs focused on:
- Including minority groups (black individuals, individuals with disabilities, residents in underserved communities);
- Consumption profiles (gamers, tech-savvy people);
- Demographic profiles (teenagers, elders);
- Professional group or business profile (micro-entrepreneurs, truck drivers, waste pickers, cosmetics sales representatives, cleaners).
Simply put, wherever there’s a group facing common challenges that are not handled properly by existing financial solutions, there’s room for developing a niche fintech!!
Examples of niche fintechs to inspire you
Among so many fintechs thriving in Brazil and Latin America, Conta Black and Target Bank are examples that have interesting purposes and work with very specific segments in the market.
Conta Black, founded by Sérgio All, is a niche fintech aimed at black people that proposes an inclusive and democratic approach to the world of finance. Currently in the testing phase with the company's exclusive app, Conta Black offers solutions such as virtual card, generation of billing links, payment of bank slips, current account and Financial education. In addition, it also has affordable rates and expansion plans that involve a cashback program and an integrated marketplace.
In turn, Target Bank, is a fintech focused on technological and financial solutions for the road freight transport industry. The company has identified the niche has specific demands—such as difficulty in going physically to branches due to time on route—, and therefore developed a digital account for truck drivers, featuring a variety of exclusive benefits. Among them, cashback and a toll tag.
Embedded Finance: Opportunity for any business to become a niche fintech
Niche fintechs have significant room to grow in the payment and banking industry and thus create opportunities for businesses and contribute to accelerated financial inclusion.
And it's not just new companies that can participate in this transformation: through the movement of Embedded Finance <span style="color:#fff">now</span> and models like Banking as a Service and Fintech as a Service, businesses already consolidated in other segments can engage their niche audiences by offering financial solutions.
Would you like to learn more about real-world examples showing how it happens?
Two companies working with different industries are growing by also operating based on models similar to the ones in niche fintechs: Donus (by Ambev) and Minha Revenda Digital (by Grupo Boticário).
Donus is a financial solution developed by Ambev, which is built to help improve financial management for micro, small and mid-sized business networks that are clients of the brand. Services provided include digital accounts, payment terminals and credit.
On the other hand, Minha Revenda Digital is built by Grupo Boticário to financially include their brands sales representatives while also providing solutions that streamline their sales: Payment terminals, payment links, pay slips issuing, and more.
More than developing a financial product, it means being passionate about the challenge!
In a rapidly-evolving scenario in the financial industry, niche fintechs are in the spotlight of the opportunities for businesses starting to develop their solutions.
However, by working with a specific consumer profile, it becomes even more essential to understand and be passionate about the challenge to be solved by financial services for long-term success.
Here at DOCK, we support those businesses’ progress by decoding the financial universe and technology for payment and banking so that the same niche fintechs can market their solutions faster and channel their energy to actually understand their dedicated audiences.
Want to learn more? Watch our video manifest:
Niche fintechs: Takeaways from this article
- Niche fintechs are the ones dedicated to a specific consumer profile, with solutions focused on unique needs. That niche targeting can be based on a behavioral or socioeconomic profile, among others.
- Benefits for fintechs working with niche solutions include high customer loyalty and service usage rates, and the possibility to explore a market with high potential and a lot of room for innovation.
- New businesses are not the only ones which can operate as a niche fintech: Businesses from different industries can have their own fintech through the Embedded Finance model, thus engaging their audience in a new business front.
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