With many in Latin America paying bills in cash, stashing their earnings at home and taking loans from local money lenders, it’s no surprise that fintech is one of the regions fastest growing markets.
The unbanked often lack access to financial institutions – and with no credit history, don’t meet the requirements to support a loan. And yet despite the fact that 400 million people in Latin America don’t have a bank account, almost everyone has access to technology, in particular a mobile phone.
This has lent itself as an opportunity to startups, who instead of taking this as a problem, have found ways to bridge the gap between the unbanked and financial inclusion by offering online and mobile solutions.
Here are the 5 forerunners providing financial services for the previously unbanked:
This early stage startup from Chile is tapping into utility networks, allowing users to take the reigns of their finances without having to step foot in a bank. Destacame provides an alternative credit scoring platform that uses different data – such as electricity payment transaction – to create an assessment of an individual’s creditworthiness. This customer data can then be provided to financial institutions to extend credit or other financial products that previously an unbanked customer would be unable to provide.
Mexican fintech startup Clip provides credit card readers for mobile devices. Through hardware plugged into any mobile phone, Clip is helping bring financial inclusion to SME’s. For example, a taco stand in Mexico City that typically didn’t accept credit cards, can now use Clip to not only efficiently manage their business, but use the data to answer and prove how much was sold in a day. Clip allows small businesses to be financially ready to request formal financial product or services – which in essence, paves the way for unbanked businesses to become banked.
Tienda Pago is providing working capital to the SME retail sector in Latin America. Operating in Mexico, Venezuela and Peru, Tienda Pago helps stores finance payments – improving income, increasing sales and developing a formal credit history. While in the past a small corner shop would have to pay a supplier on the spot, Tienda Pago provides stores access to working capital. The founder Dan Cohen will be speaking on the fintech entrepreneur sector in the region at FINNOSUMMIT, one of latin Americas most successful fintech conferences, to be held in Miami on November 9th.
Fundación Capital is very much the leader in inclusive finance and a testing ground for innovation in asset-building, working to eliminate poverty by expanding access to capital, information, training, and productive opportunities. A pioneer in the fintech sector, Fundación Capital works to improve and develop policies that facilitate financial inclusion and social protection in over 12 Latin American countries. One such policy is through digital solutions, through targeted, customized and UX-designed tools, Fundación Capital can help users build assets and increase their financial capabilities.
Argentinian startup Bondarea provides online lending and credit community for micro-entrepreneurs. While the region faces a lack of affordable or available loans, particularly to small businesses and individuals, Bondarea has found the remedy to provide simple and efficent financial services through their peer-to-peer lending software.
The fintech industry has already secured $186 million in venture capital investments last year, with more than one-third going to startups. With over 700 fintech startups in Latin America, 60 percent of them founded in the last 3 years, financial inclusion in the region is set to soar.