Banking Without Borders: How Fintech Empowers SMEs for a Global Future

Speaker A: Foreign.

Speaker B: Today my guest is Jose Porfirio Sanchez Talavera. Huh. Who is a director at Trafalgar Fintech. Welcome to the podcast.

Speaker A: Thank you Roger. Thank you for having me.

Speaker B: Now we always start with that very important question that I ask everyone, so I'm going to ask it to you too. Why do you do what you do?

Speaker A: So I started the company in 2018 and I started because I saw that the SME, small and medium enterprises are the backbone of the economy in my country in Mexico and most of them, uh, my country is very dependent with the trade and commerce with the US So banks, legacy banks treat them the same way they treat large companies. Most of the fintechs who are trying to address this market, they just offer one single product at a time. So we wanted to build some financial solution. This new challenger bank we are operating now that will deliver all of the financial services attached with some of the legal advice they need in order to perform their activities. Right, to deploy them as uh, if they were large corporations using lines of credit, they using escrow accounts, using investment tools, treasury cash management, everything from their computer with very uh, low cost of delivery. And that could translate into very simple solutions for them.

Speaker B: So you are passionate about helping small and medium sized businesses in Mexico because, because you found that there wasn't really a solution that was fully servicing. So that's what you're passionate about delivering?

Speaker A: Yes, I mean I've been always passionate about financial services in different ways. I find very interesting on how can you use your creativity and how much can you innovate with financial tools and services and those services are prevented to the companies, right to small and medium business because most of the time it's the egg of the egg or the hen. Right. They won't open you like a line of credit to pay for imports and export duties uh, until you're big. And how can you become big if you're a startup if they don't help you to actually do your, your, your thing? So we, we're trying to help them with artificial intelligence with uh, the same products that have been already invented. We are just putting on their hands on a very easy and accessible way. Instead of, you know, these long processes and bureaucratic processes giving them a better level of access.

Speaker B: What do you find is the number one challenge for small businesses when it comes to banking? What's the one thing that you really help them with?

Speaker A: I think credit is very hard to access. It becomes very expensive most of the time. The entrepreneurs need to put personal warranties down or even Mortgage their houses in the case that they have a house completely out of debt and uh, it's very hard for them to start a business. Raising equity is very expensive. And at the same time the easiest way to create a startup is with debt. So banks won't lend you money unless you are a very well established business. So I think that's the major challenge. How can we put some debt on the hands of new entrepreneurs of new startups and help them again with technology to integrate to their ledgers, to their bookkeeping, even to their clients so they can get rid of all that bureaucracy of starting the business and also to give them some ease of transaction in order to fund their business, to pay suppliers, to get them not worried about the funding and just to do their own thing and try to succeed in business globally.

Speaker B: This is a thing with small businesses that many banks, either they like to have like consumers or they like to have large businesses, but they don't know really how to deal with small businesses. And to your point, for them having access to credit is so important. That's the difference between them surviving as a business or not. So, um, I'm excited that you are trying to help small businesses get access to the credit and also do it in a way that's easy for them. Because you also find that small businesses are very busy running their business. Right. They don't want to spend a lot of time on financials. So you want to make it as easy and smooth for them as possible.

Speaker A: Correct, Correct.

Speaker B: Uh, so when, when that goes well, how do your customers talk about that when you actually deliver for them? What are, what are they saying about your services?

Speaker A: So I think the most clear example of things going well is a share of wallet. Right. As I said, most of the Fintech and Challenger bank, uh, competitors in the market, they just do one thing. So you could be the best, I don't know, for instance, credit card out there for, I don't know, $500 tickets. But that won't solve the entire ecosystem from the company. Right. So what we want is to have the company's business, the shareholders, business clients and suppliers from the company and also the employees. So we have developed a suite of products for each of them. So when our business is going well and the client is happy, we have a full share of wallet with them. We become their first option. Most of the legacy banks, they force their clients to hire different products that they don't actually need in order to provide what they really need. Right. Like they force you to open. I don't know, investment account when they want some m lending or they push you some insurance policies that you actually don't need. So our best compliments from our clients is when they actually get more services from us to someone related to their company in some sort of way. Uh, again, the employees, clients, whatever they refer to us, uh, through the platform itself, and they get some benefits back out of it. So that's pretty much what we do. We evaluate on our clients, I mean, for the lending process on, not, not on the net profit of the company, but on the cash flow. Right? So we run some cash flow analysis and they feel very happy or it's very easy for them because even though the company could be, not break even, but at least they have cash flow. They are, they're starting to move. And then we trust them and we lend them some money. Most of the time they pay us back, like 90, 97, 98% of the time they pay us back. And that's the most positive feedback that we can get. The way we do this is we use, as I said, some artificial intelligence for algorithms in order to verify clients, in order to prevent fraud, in order to identify if they are providing the proper address, if they are giving us real information. And then we use just our payment experience from the client, specifically and from our VIK database because we have been acquiring companies lending money from the past 20 years. So all that information from real payment experience goes into the funnel, combined with the fraud prevention that we run through these AI tools that we do to see if they have been using the same address and the same company profile. So the most positive feedback or the most, uh, exemplifying feedback that we get is again, when they either hire us for more products that we offer and, um, when they pay on time without the need of calling them every single day.

Speaker B: So really bringing all their business to you because they appreciate what you're doing and they're appreciating the completeness of all the services that you provide. That's great to hear that from your customers, right? That they trust you not just with one product, but with all their products. Um, and that they really realize that you're giving them access to credit that they might not be able to get somewhere else. So that's very powerful. And I like to do this thing called futures thinking. We don't know what the future is going to bring, not even tomorrow, but we can think about a possible future. So I'm going to ask you to think 10 years from now. So the year 2035, what do you think the landscape looks like for banking for small medium sized businesses, um, in Mexico but maybe also globally. What do you think that's going to look like?

Speaker A: So I think all these challenger bank globally they brought to the table a whole new competition who is going to become the first global bank ever. Right. Like you have your bank account open in New York and then you travel to Singapore and then you need to print your bank statement or whatsoever. And if there's a branch or an office or a computer and you can transact locally if you were in your country. Right. Or you can perform business 247 that was completely unthinkable with legacy banks because the investment they needed to do uh, on retail channels and real estate, uh, investments and assets was crazy. Right. Now you can first test your concept, have a proof of it and then invest the money. So first I think we're going to be seeing the first global bank before those 10 years. Second I think we're going to be looking at a consolidation of the market. Right now is a very wide variety of offer but the business is small. Right? Like you need to, to, to, to find the most profitable clients, not the most clients but the most profitable. That's, that's what, why we are facing or addressing this specific market instead of just like trying to serve everyone. So we are going to see uh, a consolidation on the market. And third, I think the blockchain and all of those technologies related to crypto, related to stablecoins, those are going to erase all of the borders for international transactions and for generally speaking financial services. So at some point you could be uh, doing business from Puebla in Mexico with a company, whatever in Asia, whatever in the UK in Europe. Right. And just in seconds have them paid. Confirmed compliance should be more down to earth. Instead of like sending unnecessary questions and stuff. You just do like very specific questions. Look at the documents. Information should be more connected. Fraud prevention should be also way more efficient with all this technology that we are seeing uh, moving so fast. And that's the way I see the market within 10 years like with no borders.

Speaker B: That is a very interesting uh, vision of the future. Um, I agree. I think especially the stablecoins are really going to change the game. Like you said, they're going to erase borders. It's going to be easy to transact 24 7, 365 at very low transaction cost. Um, and yes I do think that this idea that we've talked about with this global banking might finally be there 10 years from now. So that is very interesting. So if that Future becomes a reality. What do we need to do today to get ready for that future?

Speaker A: I think the most important thing that we banks and challenger banks sell is confidence, right? So international business and international commerce, it's hard because of the confidence. What happens if I wire money to this company and in the other side of the world and I don't see my money back, nor, uh, they don't deliver whatever they are, uh, providing. So what we need to do is to start building trust through our base of clients, delivering exactly what we are delivering as, uh, service providers so they can rely on us in order to perform the transactions. Very important part of our business is that we are helping them to get out of their countries to do business, providing legal services, very affordable legal services for them, transaction oriented. So I think we need to combine two things in order to be prepared for this future. Because you can be the most efficient technology, you can be, uh, I don't know, the most robust bank whatsoever. But I mean the competition is going to be trust plus something else. In my case, I think these legal services that we are providing will help us to build that. But you need to combine two unique qualities. One is not enough anymore, so you need to combine two and, um, be prepared to the market. If you're going to be the faster, okay, you're going to be the faster. But at the same time you need to have like regional presence or something else. Not, not just one of the capabilities.

Speaker B: So it is, it is all based on trust. And it's always been banking has always tied very closely to trust. So it is important to keep delivering and actually showing that your model, your more modern model is actually working for people. That, that is probably a great point to wrap this up, um, on. Thank you so much for being on the podcast.

Speaker A: Thank you, Roger.

Speaker B: And until next time, choose to be curious.