The new era of Fintechs in Latin America has already started and the inhabitants of the region are ready to use their services and experience their democratization .
In this new era of digital financial companies, rather than the emergence of new startups with solutions in this area, we will see the integration of platforms or technological “layers” that will provide services such as payroll advance or Buy Now Pay Later , to companies of any sector and size that want to use them.
“Fintech has evolved to see it as a technological layer, the same thing that happened years ago with technologies such as Cloud, Internet or Mobile, which were born as verticals and have become technological layers, this can be consumed by any company and offer financial services. This again is what is going to start to generate impact and fulfill that promise of democratizing these financial services and starting to promote financial inclusion in the region”, says Andrés Fontao , co-founder and CEO of Finnovista, a company focused on innovation and construction of startups.
Mercado Libre or Rappi , are two examples of digital platforms that, although they began providing services such as electronic commerce and food delivery, have evolved to provide financial services to their users, Fontao details in an interview with Reporte Índigo.
“This is in line with a concept that began to be heard about 18 months ago in other biographies, which is ‘ Anybody, can be a fintech ‘. Because with the correct technology and the correct regulatory frameworks, what we are going to see is the democratization of financial services that can be offered almost almost anywhere”.
Finnovista’s CEO explains that the two models that will predominate in the Fintech sector are infrastructure providers, which he calls “rilers” (rails) and those that complement these systems and companies called “plugins”.
Examples of infrastructure providers are the open banking space , open finance , in both cases they are models that allow users to share financial and banking data with third parties through Application Programming Interfaces , better known as APIs.
In the case of plugins, they can materialize in companies that offer Buy Now Pay Later services or payroll advances such as Pulpi, a financial product that allows company employees to access the salary they earn before the fortnightly or monthly payment day.
“Thus we are going to begin to see that any company can grab and plug in with APIs and offer financial services to its ecosystems”
Andres Fontao
Co-founder and CEO of Finnovista
With this expansion of the sector, Fontao warns of the possibility of achieving the desired democratization of financial services in a region in which a good part of the population is still excluded from the system.
For example, during 2021 in Mexico it was recorded that 56.7 million people had a financial product , be it a formal savings account, credit, insurance or Afore. This figure represents 67.8 percent of the total population between 18 and 70 years of age and 0.5 percent less than those recorded in 2018, according to the results of the National Survey of Financial Inclusion ( ENIF ) 2021.
Pandemic effect on fintechs
Unlike other sectors of the economy that were negatively impacted by the COVID-19 pandemic, fintechs in Mexico and Latin America experienced an expansion in revenue and users.
Six out of 10 Fintechs benefited from the confinement measures, in addition to investment in this sector, receiving 1,294 million dollars in the first quarter of 2021, which was reflected in 56 percent of startups, according to data from the Radar Fintech and Incumbents 2021 , prepared by Finnovista.
“Today there are already more than 500 Fintechs that are present in Mexico (an annual growth of 16 percent), more than 2,500 that are in Latin America and it is being a sector that already had strong growth rates, growth has been accelerated during the pandemic as a result of changes in consumption habits, both for individuals and for small and medium – sized companies.
Additionally, fintech entrepreneurship in Mexico is being empowered with capital, in 2021 records were broken at the regional level for venture capital investment and almost 40 percent of these investments were allocated to Fintech”, details the specialist.