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Fintech in Latin America: Not a One Size Fits All Deal

By Rodrigo Barros de Paula, Head of Fintech Partnerships for Visa Latin America and the Caribbean

Depending on what headlines you read, the general outlook on fintechs in Latin America and the Caribbean remains mixed, driven by market cooldowns and erratic funding rounds and deals coming out of 2022. But beyond the noise, there is no denying that fintechs, enablers and other payment innovators have changed the game – simplifying the way people pay and move money, reimagining the way businesses manage finances, and practically touching every aspect of the global economy. They have influenced consumer behaviors, raising expectations and establishing preferences for digital payments in nearly all aspects of daily life.

This is particularly true in Latin America and the Caribbean, which continues to be fertile ground for innovation. The digital revolution we have lived through in recent years has taken the region by storm, bringing on widespread internet adoption – in some cases, more than the world average – and an increased penetration of mobile and smart phone access. Yet, populations remain largely unbanked, and cash is still king, as they say. This juxtaposition though is precisely the opportunity fintechs and other payments innovators are leveraging (and will continue to do so) to reach masses, facilitate and expand access and ultimately, further financial inclusion.

Opportunities for Fintech in the region

These not so encouraging perspectives can still be considered opportunities and that’s because it’s not a one-size fits all deal. Take last year, for example - we saw funding drop more than 70%, yet 2022 still clocked in as the second largest investment year on record. Latin America gained seven new fintech unicorns across insurance, payments, and banking, and more fintechs launched products and entered partnerships to increase the offering to one of the most important economic segments, SMEs.¹

Still, the subregions behaved differently responding to local market nuances. In Brazil, which is quickly becoming Latin America’s most advanced tech-literate country with more digital accounts than inhabitants, we saw a significant downturn in funding and overall deals for most of 2022. Mexico, which has arguably held the second place leading the fintech boom in the region, showed significant lag last year in terms of financial inclusion with nearly all transactions under 500 pesos still happening in cash, yet their remittance market remained strong and SME and spend management fintechs continued to gain popularity. The Andean region saw a significant increase in activity and funding remaining strong, driven by Colombia-based startups focused mainly on SME banking and payments, and Central America and the Caribbean showed lots of momentum around blockchain fintechs as they position themselves as a global blockchain hub.

We can’t know for sure what this year will bring, but forecasts point towards some slow stabilization coming out of last year’s volatility. Alongside this, there are other factors that also point upwards, like embedded finance. More and more we expect to see the integration of financial products and services within platforms rise, making financial features fast, convenient and secure, and ultimately driving long-term growth for this category.  It’s definitely a thrilling time to be in the game and at Visa, we feel energized and remain committed to continue exploring and bringing to life ideas and solutions that can help our fintech and other innovative partners grow, uplifting more people in more places. 

Source [1] CBInsights Latin America Fintech Report Commissioned by Visa for the second half of 2022