– Between 2017 and 2023, LAC’s fintech ecosystem experienced 340% growth.
– Brazil, Mexico and Colombia represent 57% of the total companies.
– Fintechs strengthen their position in the payments segment.

BOGOTA – The fintech ecosystem has seen a growth of more than 340% in the number of finance technology startups created in the last six years, from 703 companies in 18 countries in 2017 to 3,069 in 26 countries in 2023, according to the fourth report in the Fintech in Latin America and the Caribbean series (available in Spanish). The joint study by the Inter-American Development Bank (IDB) and Finnovista was presented during the fifth annual meeting of FintechLAC, held in Bogotá, Colombia, with the support of the Grand Duchy of Luxembourg.

Chart 1: Fintech startups in LAC, 2017-23

Source: Data collected by Finnovista and IDB as part of this report (2023) and historical data. The 2023 report considers 26 LAC countries, including the Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Suriname, and Trinidad and Tobago.

The results of the study, entitled “A consolidated ecosystem with the potential to contribute to regional financial inclusion”, reflect market stabilization and progress towards long-term strength and resilience. More than half of fintech companies serve the underbanked or unbanked population, and the region has experienced dynamic regulatory development, with an increase in the number of regulatory frameworks for the development of segments such as open finance and the use of regulatory innovation frameworks such as innovation hubs and regulatory sandboxes. Fintech is the sector that attracts the most venture capital investments.

According to the report, the current growth of the fintech ecosystem in the region is due to the high demand from financial consumers, the state of digital financial infrastructure and the availability of specialized workforce. The consolidation and stability of the ecosystem is not only reflected in the increase in the number of emerging companies, especially in countries where the sector was in its infancy, but also in the diversification and distribution in terms of segments, business models, capitalization and technologies enabling.

Brazil continues to be the country in the region with the highest number of fintech startups, with 24% of the total. Mexico follows with 20%, Colombia with 13% and Argentina and Chile with 10% each. The countries that recorded the highest growth in the last two years were Peru, with 5.3% of the number of businesses, followed by Ecuador with 3% and the Dominican Republic with 2.1%.

Peru, Ecuador, the Dominican Republic, Uruguay, Costa Rica and Guatemala constitute a set of emerging markets that are developing with notable dynamism, recording an average annual growth of 44% between 2017 and 2023. These markets have gone from representing only the 7% of the regional ecosystem in 2017 (48 companies), to almost 15% in 2023 (455 companies).

The leading segments in terms of number of platforms in the region continue to be payments and remittances, at 21% of total business, lending at 19%, and corporate finance management at 13%. These three segments recorded average annual growth of 24%, 31% and 28% respectively.

A growing number of fintech startups in Latin America and the Caribbean are targeting underbanked and underbanked individuals and businesses, demonstrating the positive impact of this sector on financial inclusion. Currently, 57% of fintech companies target this segment of the population, while in 2021, this percentage was 36%. The lending segment is the leader in serving the unbanked, while payments and remittances are the segment that mostly serves small and medium-sized businesses that are underbanked.

Its development is associated with specific regulation for the sector. Therefore, countries that have adopted permanent or temporary measures have seen growth or consolidation of their fintech ecosystems. In this regard, some noteworthy cases for the period 2021-2023 are the publication and start of implementation of the Fintech Law in Chile and the publication of specific regulation for interoperable low-value instant payments and open finance in Colombia.

“The data collected in the report are key inputs for countries in the region to generate public policies that provide clarity to investors and catalyze the growth of the regional Fintech ecosystem,” said Anderson Caputo, head of the IDB’s Connectivity, Markets and Finance Division . “The report’s findings reaffirm the enormous potential of financial technology to close financial inclusion gaps in the region,” he added.

Fermín Bueno, co-founder and managing partner of Finnovista, highlighted that “the Fintech ecosystem in Latin America and the Caribbean is consolidating as a key driver for innovation and economic growth in the region, as well as for financial inclusion and accessibility to financial services for millions of people and small businesses. Our commitment is to continue to support this development, promoting collaboration between all players in the ecosystem and paving the way for a more inclusive and prosperous future.”

For the companies surveyed, the two main challenges are scalability (41%) and access to financing (19%). In the latter case, the study shows a trend of Fintech towards institutional funding sources, together with venture capital investments, both local and international. Although venture capital investments halved to $7.8 billion between 2021 and 2022, fintech continues to be the sector with the greatest participation, representing 43% of the total, and an important line for foreign direct investment in the region.

The report “A consolidated ecosystem with the potential to contribute to regional financial inclusion” is a collaboration between IDB and Finnovista, and countries and strategic allies in the region. This edition of the report contains data from 26 countries and includes for the first time the Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Suriname and Trinidad and Tobago. Its rigorous mapping identified 3,069 fintechs. Additionally, it has conducted surveys of companies in the fintech ecosystem, regulators and investors. A total of 404 valid responses were obtained from companies, representing 13% of the total universe of fintech companies, with a margin of error of 4.54% and a confidence level of 95%. Additionally, 25 investors and 32 financial authorities responded to the IDB and Finnovista survey, which was conducted in November and December 2023.

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