In the last 12 months, the number of fintech startups in Latin America has grown from 703 to 1,166, according to the Inter-American Bank of Development (BID) study “Fintech in Latin America: Growth and Consolidation.”
Just five years ago, however, fintech was a relatively unknown concept in the region. But, thanks to rapid advances in technology combined with increased mobile and internet use across the region, it seems that the fintech revolution is showing no signs of slowing down.
“Even if five countries concentrate 86 percent of the fintech businesses in the region, there have been startups identified in every single country in Latin America, along with a growing tendency towards internationalisation,” explained Juan Ketterer, the head of Connectivity, Markets and Finance at the BID. “This shows that entrepreneurs are aware of the opportunities available to them, but also the importance to keep strengthening dialogue and harmonisation at a regional level.”
One of the reasons why fintech is experiencing such a boom in the region is due to a general distrust of banks, especially after the financial crisis of 2007-2008. This sentiment is even stronger in Argentina, as their economic crisis in 2001 led to the “corralito,” where the government almost completely froze bank accounts and forbade withdrawals from US dollar- denominated accounts.
As well as this, only 54 percent of people in Latin America had access to a bank account in 2017. This is a marked increase from 39 percent in 2011, but also reveals a reliance on cash as well as a lack of financial education throughout the region. A consequence of this, explained the BID study, is that in order to persuade those who work primarily in cash to move over to fintech solutions, the platform will have to be very easy to understand and access, as well as providing extra value to them.
Fintech companies often provide simple and low-cost financial alternatives which are extremely popular with Small and Medium-Sized Businesses (SMEs), of which 90 percent of the regions companies pertain to. Added to the fact that the region boasts a 50 percent rate of mobile internet coverage, which is higher than the world average of 43 percent, the space for budding fintech companies has never been more positive.
