Latin American economies have long expressed interest in the advantages of cryptocurrency and blockchain technologies. Now that El Salvador announced that it would be adopting Bitcoin as an official currency alongside the US dollar, that interest has become concrete.
But what will the effects be on the Nearshore community, and in particular on those BPO providers who are looking for opportunity in the fintech space?
“For one of our clients, a leading cryptocurrency exchange platform, we’ve provided quality client-customer and fraud prevention support, as well as transaction monitoring methods to ensure security,” said Josh Nutter, Vice President of Business Development at TaskUs, which has operations in Mexico and Colombia. “We address fraud payments, consumer compliance, account hold issues, missing funds, payment method issues, login issues, among others.”
Given the explosive growth in both the fintech sector and in cryptocurrencies, it’s no surprise that the two would dovetail – and that Nearshore providers would want to get in on the action. As crypto grows in popularity, it will require an ecosystem that supports its unique combination of technology and finance.
“A reinforced cybersecurity framework is crucial to providing the best customer experience,” said Nutter, adding that TaskUs currently serves 15 fintech clients. “Having the right mix of leadership, innovative tooling and refined processes will be the best form of support for the crypto ecosystem.”
Massive Crypto Demand
In Latin America, the growth in the use in cryptocurrencies – and hence in their underlying blockchain technology – has been staggering. According to Statista, 18% of Brazilians and Colombians, 16% of Peruvians, 14% of Argentinians and 12% of Chileans have either invested in or used cryptocurrency. The only country with a higher ranking was Turkey, at 20%.
“Cryptocurrency is easy, and allows you to have a safe option to transfer value without the need for a trusted third party,” said Eloisa Cadenas Morales, Founder and Managing Director of consulting firm CryptoFintech in Mexico City, and a professor at the Mexican Stock Exchange Group. “There are parts of Latin America where people don’t have access to banking – but they do have a mobile phone.”
This provides a great opportunity for fintech companies to reach the unbanked, an immense market that has historically been ignored by established financial institutions. Other key factors are currency instability – as most recently exemplified in Venezuela and Argentina – and the heavy reliance on remittances.
In 2019, over 20% of El Salvador’s GDP came from remittances. With the adoption of Bitcoin as an official currency, El Salvadorans should be able to avoid the sometimes costly transaction fees that cross-border transfers generate.
18% of Brazilians and Colombians, 16% of Peruvians, 14% of Argentinians and 12% of Chileans have either invested in or used cryptocurrency
Mexico, however, is where the big money is: in 2020, the Mexico City-headquartered cryptocurrency exchange Bitso processed about US$1.2 billion in remittances, yet this represented only fraction of annual remittances from the the U.S. to Mexico, which were over US$40 billion last year.
“The remittance sector is quite attractive,” Cadenas Morales said. “If we think about the use of a crypto asset like PXO, which is a stable coin represented by Mexican pesos, what happens is that someone who wants to integrate it into their remittance business model would have the option of doing it faster, and less expensively.”
Cadenas Morales also sees opportunity in the health sector, media, and any company involved in logistics, with these industries able to leverage the wide adoption of messaging applications like WhatsApp, Telegram and Facebook Messenger.
“The use of crypto assets can be integrated into mobile messaging applications, and that really facilitates and optimizes the process” she added.
U.S. to Mexico remittances were over US$40 billion last year
The irony is that though cryptocurrencies can remove the need for third party payment companies like Western Union, their use requires a degree of sophistication. This then represents an opportunity for simplified trading platforms. Examples include Crypto Market in Chile, Valiu and Panda Exchange in Colombia, Atlas Quantum in Brazil, and Bitso in Mexico.
There are also big international cryptocurrency platforms that are making inroads in Latin America, among them the Finnish company LocalBitcoins, and UK-headquartered Nexo.
“Nexo is a platform that, personally, I have liked for a long time – in my courses or conferences I always use it as an example of credits with crypto,” said Cadenas Morales. “I like it because it’s a way to obtain liquidity without having to get rid of your cryptos. Credit is a powerful tool for people to pay for college, start a business or buy a home.”
To understand the potential for a company like Nexo, one just has to consider that, in Mexico, lending rates are astronomical, with interest rates on personal loans ranging from 16% to 60%.
Advancing Crypto Regulation
The Nearshore community can leverage the opportunity provided by cryptocurrencies and blockchain technology by tracking the growth of the various platforms – some of which may not have been built with customer service in mind – and by investing in the right skill sets.
To do that, it’s critical to stay aware of the rapidly changing regulatory environment to see where investments might be made, and to assess the requirements. Aside from El Salvador, in Panama legislators are reportedly moving to implement “crypto friendly” laws. And though Mexico was the first company to come out with a Fintech Law back in 2018, events have moved so quickly that it is now in need of an update.
“Definitely, the Mexican authorities will be issuing provisions establishing new controls for crypto assets,” explained Cadenas Morales. “When the Law to Regulate Financial Technology Institutions – or the ‘Fintech Law’ – was issued, there were aspects of regulation that were not anticipated. Now, after three years, the market for crypto assets has evolved rapidly, forcing regulators to rethink their positions, and to align with the international context, especially in terms of preventing money laundering and terrorist financing.”
A robust and future-oriented regulatory market in Latin America is clearly on the horizon. This will support more activity, which will drive investment, thus fuelling growth that will almost certainly require BPO support for when online systems fail. This is a new and challenging area. Hiring and training the right people will be critical.
“With our current crypto clients, we understand that agility and flexibility in staffing is key,” said TaskUs’ Josh Nutter. “Security is important in fintech, and more specifically in crypto, so you need to ensure you have the right controls in place to support work-at-home or in-center solutions.”
Hiring and training the right people will be critical to the growth of fintech in the region
That means recruiting talent for crypto by looking for critical skill sets like problem-solving and comprehension. This is above and beyond a candidate’s given financial experience or background. TaskUs, for example, uses game-based simulations to determine problem-solving and to train their base knowledge around crypto and specific products.
Having the right people supported by robust anti-fraud technologies could capture a lot of business that, at present, is still on the table. In only the first two months of 2021, US regulators dinged corporations with more than $200 million in penalties for violating Anti-Money Laundering laws. As the global consumer base for cryptocurrencies blooms, there will be a requirement for enhanced customer support – and Nearshore providers would be unwise to miss out on the opportunity.