Fintech growth is booming across Latin America (LATAM) where over 2,200 fintechs are estimated to offer services to customers.
The region continues to benefit from an appetite for seamless, accessible and transparent services. And thanks to high internet penetration, fintechs can cater to the region’s largely unbanked population who can still access smartphones.
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LATAM: fintech growth of 20% y-o-y until 2027
While many companies have been in the space for over a decade, newcomers have been entering at an exponential rate for the past five years. Despite problems in the previous years, 2024 is set to be a hotbed when it comes to fintech growth and activity. It is estimated that the sector will enjoy growth of around 20% year-on-year until 2027.
“Rebounding from 2023 as a year of capital constraints for the region, we should expect Latin American fintechs to gear up in 2024 with an increased momentum,” says Jeremy Baber, CEO of Lanistar.
“With a great appetite for seamless, accessible and transparent services, LATAM is rapidly developing into an ideal environment for fintech start-ups to call home as digital wallets become the norm.”
Baber says there is a lot to learn from regions of less established banking markets, which often have greater room for growth and potential than their European counterparts. “Less established banking regions and countries offer a greater opportunity for growth in digital wallets. Brazil, Columbia and Argentina are prime regions to embrace this technology. They are developing into the ideal environment for fintech start-ups to call home as investment and adoption continue to boom.
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By GlobalData‘LATAM is the perfect environment’
“As we’ve seen in past years with El Salvador’s formal acceptance and adoption of cryptocurrency, the governments and regulators in the LATAM region are great supporters of embracing fintech, crypto and new developments in the finance industry. From an investment perspective, hubs such as Europe and the US have taken note of this fintech boom in the region and are now investing millions into the market themselves. An appetite for change is exactly what fintech start-ups need, which is why LATAM is the perfect environment.”
Baber also highlights that emerging markets can more easily take advantage and tailor their offerings towards their dominant demographic of under 30s in that region.
“In the emerging market, meeting the convenience of the consumer is a priority to capture and keep attention. Thus, the virtual market has the most opportunity for fintechs to settle and develop, as Gen Z and Millennial demographics favour online transactions but are rarely loyal to sticking blindly to a particular brand.
“These demographics are far more likely to adopt contactless methods or those that reduce payment steps rather than stick blindly to a company that doesn’t ultimately have their best interests at heart. Brazil, for example, has been able to take this one step further, with heavy developments in payment methods such as PIX and QR-code-driven payments – something the European market can look to learn from and adopt themselves. This growth has aided in standardising payment practices across the region, making it less volatile and more focused on innovation overall.”
Neobanks to enjoy a strong 2024
Baber stresses the dominance of neobanks, who are braced for a more favourable year in Brazil and across LATAM relative to 2023.
“High interest rates and borrowers struggling to repay loans in a high-inflation environment is key in helping neobanks bounce back. Most digital lenders pulled the brakes on lending last year, as they instead assessed the impacts on their portfolio from the increase in delinquency ratios.
“But neobanks are here to stay. In the beginning, they were good at launching products and onboarding clients, which is set to be critical in 2024. Fintechs are shifting their focus to upselling and cross-selling, aimed at maximising revenue from each active customer. 2024 is set to be about reaping this harvest, rather than needing to plant more seeds.
“As capital slowly but surely becomes more available, LATAM companies will gradually venture into lending and investment. This will allow fintechs remaining on the periphery to gradually gain more influence moving into the market centre. Fintech as an industry continues to offer users cutting-edge financial solutions, and so with its potential to evolve and experiment in the region exponentially, we’re sure to see massive growth and creativity throughout this year and beyond.”
