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The fintech market in Latin America




Get to know more about the fintech market in Latin America


Are you familiar with the fintech concept? Financial technology (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. ​​​At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives.


Fintech market in LATAM


According to the International Monetary Fund (IMF), In the past decade, fintech has shaken up the financial sector in Latin America, providing innovations in lending, payments, insurance, and regulation and compliance. A study carried out by this organization stated that in 2021 there were more than 300 million users of digital payments and more than 30 million users of digital banks, mostly concentrated in Mexico and Brazil, where is located one of the largest digital banks in the world.


But why fintech has gained such big ground in a short period of time? Here are some of the reasons given by the IMF.

  • Brings innovation: Transactions take less time with these new payment systems. Even common bank errands such as opening an account or getting a loan can be done through digital channels, and digital wallets have become as essential as a cellphone.

  • Boosts competition: Fintech companies provide banks and insurance companies with new technologies and services, blurring the lines with traditional businesses, therefore creating more channels that offer these type of services.

  • Increases inclusion: This type of alternative has boosted access to finance for micro, small, and medium enterprises, as well as lower income population, closing the gap for those with fewer opportunities, especially in one of the most unequal regions in the world.

Business opportunities in the region


But what are the most popular and growing sectors in Latam? According to the IMF study, in 2021, a quarter of fintech startups in the region focused on digital payments and remittances, followed by about a fifth focusing on alternative financing (lending) platforms, and about a sixth providing services related to enterprise technologies for financial institutions including scoring, identity services, and fraud detection. The share of digital banks among startups is now relatively small, as several digital banks have become very big. In terms of assets, digital banks have seen the fastest growth among fintech startups between 2017 and 2021.


Business-to-business (B2B) fintech startups providing technological solutions to existing financial institutions on average grew annually by almost 50% between 2017 and 2021. About half of their revenue comes from digital banks. Digital infrastructure solutions and smart contracts generate 20% and 10% of their revenue, respectively. The rest comes from data processing, Know Your Customer (KYC) services, and chatbots.


Today, local governments are expanding legislations and regulations to make these markets more secure, and even increasing digital solutions to the state services. In Chile, for example, the government of President Gabriel Boric got approved a $100 million loan by the Inter-American Development Bank to support Chile's digital government agenda. This operation seeks to boost efficiency and equity in the provision of citizen services through the digital transformation of the State, both at central and at regional and municipal level.


As you can see, there are many prospects to take advantage of, especially in big and consolidated markets as Colombia, Brazil, and Mexico.


Closing the gap between local and international companies


As BusinessHub we have had the pleasure to participate in numerous events that are hyping the fintech market in the region. This year, and on behalf of Invest Hong-Kong, we participated in the Rio Web Summit, where we worked together to connect with over 28,000 attendees and meet with over 500 companies and professionals interested in learning more about the digital market in Hong Kong. This is the largest technology and innovation event in the world, attracting investors from all over the world to Latin America.


We also participated in the Chile Fintech Forum, one of the biggest events in the country, and a great opportunity to talk about digital finance, innovation and technology. Chile is updating its policy to protect consumers, and here we had a chance to learn about challenges and opportunities of the first Fintech act, which aims to regulate the market and create more inclusion.

As stated before, there are many events going on in different countries, and we offer the opportunity to help governments and private companies to find their best options in the fintech Latin American market.


Conclusions


The fintech market in Latin America offers various opportunities because it brings innovation, boosts competition and increases inclusion. Digital payments and remittance are some of the most popular areas gaining interest not only in local entrepreneurs, but also in foreign investors, attracted by the different possibilities in the industry.


We're currently assisting governments and businesses from various regions in connecting with fintech companies and events in Latin America, showcasing one of the world's most promising markets, as the fintech industry holds large potential in our region. To help organizations embrace change and prepare for the future, we provide valuable support in their interactions with fintech entities, offering market insights and innovative approaches, empowering them to stay ahead in this ever-evolving landscape. Get in touch with us if you’re interested in a free consultation.


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