By 2021, Latin America reached a total of 1,524 institutions offering digital financial services in the categories of payments, insurance, loans and investments. The financial technology sector, known as Fin-tech, in Latin America is growing rapidly: 90% of startups in the sector were established between 2013 and 2020. The upward trend continues, driven by growing interest among venture investors and international expansion across the continent.
The amount of Venture Capital investments in the financial services industry passed from being 53 million in 2013 to 3 billion market cap in 2020, carrying immense percentage growth in the sector. However, this trend is not homogeneous in Latin America and the Caribbean. Almost 90 percent of all Fintech activity is concentrated in Brazil, Mexico, Colombia, Argentina and Chile.
VC interest in Latin American Fintech startups may be growing, but for entrepreneurs in the sector, access to funding remains a major challenge, especially in the later stages of scaling up. They mainly raise funds from sponsoring investors and accelerators . Another challenge founders face is finding talented people with expertise in financial services and digital technologies.
When it comes to Fintech companies being adequately equipped to face the challenges of the industry, it is critical that financial regulations and public policies are adapted to the needs of entrepreneurs to further stimulate their development and, thus, create a more inclusive financial system and stimulate their growth in Latin America and the Caribbean.
Fintech is creating inclusive opportunities in Latin America. Women lead or are part of the management team in 35% of the initiatives related to fintech or financial technology startups. This figure stands out from the global average for this sector, where only 7% of entrepreneurs are women.
In addition to the opportunities provided by Fin-tech, blockchain offers great opportunities. Blockchain technology has been presented to the world as a disruptive wave that allows many sectors to provide another level of service as it has the potential and ability to give the world a level of financial integration and decentralization of trust never seen before. As a decentralized technology, meaning it does not belong to a single entity or a single person, blockchain changes the perception of security on the network. Instead of placing our trust in a single institution (a bank, for example), we now place it in an anonymous network controlled through millions of computers scattered around the world. This, coupled with greater transparency in every transaction. Governments, companies and institutions all over the world have revisited their processes and business models in search of replacing old systems with this new alternative.