Nearshore Americas
Fintech Latin America

The Fintech Revolution is Fully Underway, Supported by Latin American Startups

Financial technology (fintech) startups are mushrooming all across Latin America, with the Inter-American Development Bank (IDB) identifying 1,166 fintech ventures in the region this year, a stunning 66% rise since the first study published by the organization in 2017.

The report also found fintech activity expanding to 18 countries in the region. Brazil is leading the pack with 380 startups, followed by Mexico with 273, Colombia with 148, Argentina with 116 and Chile with 84.

More importantly, they are attracting ‘a record amount’ of investment from venture capital funds. Interestingly, the top 10 startups to receive the most investment are all based in Brazil, such as NuBank, ContaAzul and GuiaBolso.

“The fintech ecosystem has achieved major growth and maturity over the past year,” said Andrés Fontao, Managing Partner of Finnovista, which took part in the study. “The fintech opportunity is now being closely examined by major international investors, including ones from Asia.”

According to the report, two out of three startups are in the advanced stage of growth, and one of every three companies is expanding its operations beyond the borders of its home country.

“Although five countries account for 86% of the fintech companies in the region, initiatives were identified in every country in Latin America. There is also a growing trend toward internationalization,” said Juan Antonio Ketterer, Division Chief of the Connectivity, Markets and Finance Division of the IDB.

The main business segments are remain payments and remittances, representing 24% of the initiatives identified, followed by lending (18%) and enterprise financial management (15%). There are also many startups providing digital banking services, in addition to credit scoring, identity and fraud protection.

Interestingly, female entrepreneurs are showing a lot of interest in launching financial technology ventures too.

“We found that 35% of the fintech companies in Latin America were founded or co-founded by women, which is well above the global average, estimated to be 7%”, said Gabriela Andrade, a financial markets specialist at the IDB.”Although fintech companies with women in the founding team operate in various areas, it is interesting to note that one in every three of these companies targets segments of the population underserved or outright excluded from the formal financial sector.”

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There are a number of challenges startups in the region face too. 55.6% find that scaling up us the main challenge whereas 33% say raising funds is the hardest.

Furthermore, 40% say that specific regulations do not exist in their countries and that they are needed, compared to 28% that say the current regulation for their sector is adequate.

Out of the 703 startups identified last year, 85 have shut down meaning that there is a mortality rate of 12%.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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