We wrote about the CFO in crisis mode and the need for better software to be built for the finance suite. If the average CFO is in a crisis, the emerging markets CFO serve are in an even bigger crisis! In LatAm for instance, existing legacy systems are even more fragile, as APIs to extract banking information generally don’t exist, payment methods are more fragmented (across banks, digital wallets and cash), and every market has its own regulation (or lack thereof!) This lack of infrastructure not only makes everyday financial tasks difficult for companies, but adds another layer of complexity to the already challenging tasks of fraud detection and credit underwriting.
I got a glimpse of some of these challenges when a portfolio company of ours operating in multiple countries told me they hired an intern to log in to multiple business bank accounts and manually record the balances in a spreadsheet several times per day. They did this because there wasn’t an API where the company could extract their own financial information across the banks they used in a standardized and real-time way.
Take a more complex case: a payment service provider (PSP) who accepts payments from multiple sources including credit cards, wallets, bank transfers, Cash from Oxxo, and other local processors (e.g., Mercado Pago, Flutterwave). In order to fully verify and reconcile payments across all these sources the PSP created:
- A payment operations team where members manually log in to each payment source every 15 minutes to verify the payments have gone through.
- An audit team who logs in to each source to perform an offline reconciliation.
- An accounting team who logs in to each source to download different formats (PDF, OFX, TXT) required for audit.
- Support teams who would often need to also log in to verify data for customer issues.
- And finally an operations team would need to log in to ensure each account was running correctly!
To add insult to this very manual operation–different people logging in from different places would trigger bank security teams to block the accounts.
It was this widespread PSP problem that Sergio & Gonzalo, the founders of Datanomik set out to solve. After replacing the FIVE teams that were manually logging in to all accounts with an API that would extract and standardize the data for many formats across multiple sources, they realized they were not the only company experiencing this challenge. I am fond of saying that “every company will become a fintech company,” followed closely by what’s relevant here: every fintech company will inspire a fintech infrastructure company.
Solving the crisis
Datanomik has built a set of APIs and a customizable platform that allows companies to have easy access to their financial information across multiple banking accounts and other payment sources. Starting with Brazil, the company plans to quickly expand to Colombia and Mexico and beyond.
A B2B transaction API will benefit:
- Companies operating in multiple countries (with a bank account per country, likely different currencies) who need a single dashboard to view & reconcile payments.
- PSP who accept payments from multiple sources as described above.
- Any company needing business banking data to KYC, underwrite for loans etc. (vs. downloading and bank statements in varying formats)
Sergio Fogel, co-founder of Dlocal (first Uruguayan company to go public on the Nasdaq exchange, a platform that helps global companies accept payments from consumers in emerging markets using local payment preferences), tapped Gonzalo Strauss, Head of Product at AstroPay (also co-founded by Sergio) and a talented engineering manager, to solve this issue internally for the team. Gonzalo quickly built an elegant solution with a relatively small team. We are thrilled to back Datanomik in solving the global CFO crisis across more countries and use cases.
The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.