After almost three years of operation, Ank, Itau’s digital banking enterprise in Argentina, is moving closer to a shutdown after a sharp pull from its only shareholder.
A bank-led virtual wallet, Ank sought to simplify financial transactions by reorganizing multiple accounts in one app. The unit saw stiff competition from new players and a risk-averse scenario that led Itaú to cuts in Latin America.
Ank is an independent company from Itaú, although the Brazilian bank is its sole shareholder.
“Considering the global scenario of rate hikes and the impact on fintech valuations, Itaú Unibanco has decided to divest its Ank operation and re-evaluate possible strategic paths within 60 days,” the bank said in a brief statement in June.
“Itaú Unibanco, the leading bank in Latin America, with a presence in 8 countries and more than 40 years in Argentina, confirms its commitment to the region.”
The decision from the lender surprised many in the Argentine fintech ecosystem, as until recently, the company had announced it was planning to launch new products and potentially lay a foot in the cryptocurrency space, one of the sectors in Argentina that are drawing interest even despite the so-called crypto winter.
Decided to close
Although the Brazilian lender considered other options such as a sale or integration as a service hub, Itaú appears to have decided to close by the end of this month, Bloomberg Linea reported.
A risk-averse scenario in global markets led many companies in the financial space to adjust roadmaps, including massive layoffs in some cases and a more significant pressure to achieve profitability as opposed to solely focusing on growth.
The decision from the bank comes as Itaú made significant cuts elsewhere in Latin America, announcing it was getting ready to lay off 300 workers in Colombia.
Brazilian banks have pursued a robust downsizing process as the threat of lighter fintech competitors grew. The bank is one of the few traditional lenders with a sizeable operation outside its home country.
“Ank was not the main strategy for Itaú, and it was born in Argentina when multi-account apps were not yet developed,” said Ignacio Carballo, a fintech analyst and adviser. According to him, the competition in the sector rapidly intensified as new companies such as Bimo or Modo opened up right away, catering similar services to Argentinians.
Ank’s closure raises the question of whether there is still room for new players to compete in the digital wallet sector in Argentina, where prominent fintech players such as Mercado Pago, a fintech segment of e-commerce giant Mercado Libre, and Uala dominate the ecosystem.
The fintech ecosystem has grown notable in size. According to a report by the Argentine Chamber of Fintech, the number of companies doubled in two years, going from 133 companies in 2018 to 268 in 2020.
Banks not allowed to offer crypto brokerage services
Earlier in the year, two banks in Argentina announced plans to enable Argentines to buy and sell digital currencies through their platforms, as opposed to crypto-specialized fintechs as it is done today, to attract new customers.
But days later, the central bank of Argentina abruptly dismissed that possibility. “Financial entities may not carry out or facilitate operations with digital assets, including crypto assets, to their clients,” the bank said in a note.
Fintech experts had praised the decision that private banks were getting on board, in a clear sign that banks were going after the vast number of users that had flocked to the crypto space in the past few years.
But they were surprised by the regulator’s blunt decision. “There was a lack of timing,” Gastón Bielli y Carlos Ordoñez, lawyers at Digita Consultores, said. “It was an improvised and disorganized last-minute swerve to slow down, at least temporarily, the process of adopting cryptocurrencies by banking entities.”
Discourage further investment?
Some argue that it could discourage further investments from traditional institutions.
Ank had signaled that it was looking into the crypto segment to expand its revenue sources. For some, that might be another factor weighing in the decision. “Not only did the global scenario change but in Argentina, there were twists and turns regarding the impossibility of bank accounts to operate with cryptos,” Carballo said.
Cryptocurrency trading in Argentina, as in many places in Latin America, receives traction from its citizens for investment purposes, many of whom suffer from the unsteady local currency and high inflation. In the case of Argentina, trading remains strong in a country where inflation runs at a 100% pace per year, and the local peso has suffered repeated depreciation over the past year.
Ank did not reply to a request to comment.