Fintech
Finnovista: Latin American fintech platforms have surpassed 3,000 companies in 26 countries
A recent report from the innovation company Finnovista and the Inter-American Development Bank (IDB) reveals the significant expansion of the fintech ecosystem in Latin America and the Caribbean (LAC), characterized not only by an increase in the number of emerging companies, but also through a diversification of segments, business models, capitalization and enabling technologies.
The region’s fintech platforms reached a record 3,069 companies across 26 countries. Compared to 2017, the evolution of the fintech ecosystem in the region reveals a growth of more than 340% in the number of fintech startups.
The report highlights that these dynamics reflect a stabilization of the market, towards long-term solidity and resilience. The economies that bring together the largest number of fintechs are Brazil, Mexico and Colombia, with 57% of the total.
In terms of segments, in the period analyzed (2017-23), it is observed that the Payments and Remittances segment (632 companies, 21% of the total companies in the region); Loans (591, 19%) and Corporate Finance Management (413, 13%) remained the undisputed leaders, firmly occupying the top three positions and recording an average annual growth of 24%, 31% and 28% respectively.
While venture capital investment has declined since the last 2021 report in the region, the percentage of fintech investment has increased in the tech sector, growing 46% to reach $1,873 million.
Startups are diversifying their funding sources and exploring new growth strategies, such as mergers and acquisitions.
Access to finance is a key challenge for 20% of the platforms consulted in this study, which highlights the importance of aligning financing strategies with market expectations and capabilities.
The trend towards more institutional funding sources, together with the growing presence of venture capital investments – both local and international – suggest cautious optimism.
However, the biggest challenge for the industry continues to be scalability, identified as such by 41% of fintech companies surveyed as part of this study.
The dynamic environment described in the publication, complemented by the fintech sector’s ability to enable efficiencies in other economic sectors, highlights the importance of monitoring the evolution of disruptive financial technologies – for example, cryptoassets and open finance –, as they promise to reconfigure the technology finance landscape in the region and generate new business opportunities.
Likewise, within the framework of the 2030 Agenda for Sustainable Development, the fintech sector emerges as a key player, with the potential to contribute to the development of a financial architecture aimed at sustainability and economic and social inclusion in the region.
79% of companies declare that they have generated a positive impact on at least one of the Sustainable Development Goals (SDGs). On the other hand, the document highlights the ability of platforms to generate processes of change on gender and financial inclusion issues.
For example, in the 2020 survey, 15% of fintech startups in Latin America were moving towards gender parity on their work teams, while in the 2023 survey, 27% of companies in Latin America had reported having more than 50% women in their workforce. .
The report highlights opportunities to deepen sector synergies between fintech companies and financial institutions towards deeper integration of the financial ecosystem.
61% of fintech companies in the region collaborate with the traditional financial sector, although the perception of 49% of platforms is that this is a weak relationship.
In terms of public policy, the study updates information on the regulatory status of specific segments and the use of regulatory innovations such as innovation hubs and regulatory sandboxes.
When compared to the most recent report (published in 2022), there are 13 innovation hubs, 9 regulatory sandboxes, and the issuance and implementation of the Chilean Fintech Law.
Likewise, Colombia has made progress in creating a roadmap and regulating open finance.
The report also presents the evolution of the industry’s perception of the regulatory environment and analyzes innovative data collected in a survey aimed at financial authorities.
Regulation plays a key role in providing a safe and enabling environment for the expansion of fintech, while addressing the challenges and risks inherent in these innovative models, as well as digital and data-driven technologies.
Only 38% of fintech platforms surveyed as part of this study believe regulation is adequate.
On the other hand, 66% of financial regulators surveyed report having an institutional strategy that addresses innovation in the financial sector, while 59% have a specific area or agency dedicated to this purpose.
This publication redoubles the Inter-American Development Bank’s efforts through the FintechLAC initiative to inform public action and promote favorable policy and regulatory environments that enable the development of the fintech ecosystem.
This work was funded by the FintechLAC network, the first public-private network in the fintech and digital finance sector in LAC.