There is a wind of change in the payments space and Latin America has not been immune to it. Long are the days when financial services only meant saving money in the bank. Welcome now to the fintech era, when startups and non-bank providers are disrupting and complementing traditional payment-related practices, transforming customers’ everyday lives in the process.

Zooming in on Latin America, we see activity concentrated around sectors like payments, lending and enterprise financial management, but also identity, and blockchain, segments which are gaining significant traction. Moreover, there are almost 40% more startups today across the region, as compared to one year ago. It goes without saying that those operating in any of these new spaces are set to position themselves as the new rising stars of Fintech in Latin America.

There have been considerable advances in financial technology in the region in the past five years, however many tools are still available only in the countries where they were founded, according to a report by Oliver Wyman. The same source provides a snapshot of local fintech players in Chile, Brazil, Mexico, and Colombia, as illustrated below.

Source: Oliver Wyman

The road to financial inclusion is paved with good intentions

Just as it is the case in any other corner of the world, disrupting the traditional financial sector in this region is not without its challenges (regulation, to name but one). However, momentum is building and an increasing number of people are gaining improved access to financial services.

The need to address financial inclusion in the region is clear from some of the statistics quoted by Finextra, mentioning speakers at Swift’s Latin American Regional Conference: “250 million people in Latin America are unbanked. In addition, Georgette Jean-Louis, director general and board member at the Central Bank of Haiti cited Norway’s 100% rate of financial conclusion, and compared this to Latin America and the Caribbean’s rate of 51%. Jean-Louis said that as a member of the central bank, growth is her main goal, and that financial inclusion is an important pillar of this.”

Fintech + banks = key to industry collaboration?

The importance of collaboration between banks and fintechs has been constantly highlighted by the industry.  While the latter are well-known for their disruption potential, it is important to remember that innovation can also come from ‘traditional’ banks, as well.

However, there are several impediments that make business relations between banks and fintechs not so easy to develop. From the banks’ perspective, fintech players do not have the proper IT security and regulatory certainty, while fintechs believe banks can be difficult business partners, due to the differences in management and culture, and operational processes, most of all.

“Latin America is still not at the levels of Europe or Asia, where collaborative programs are already in place among important actors within the industry (…) Nevertheless, collaboration in the region is becoming more frequent and the growing development of the Fintech industry will
allow the expansion in quantity and quality of synergies between different actors in the ecosystem.”

Fintech Innovations report, by IDB and Finovista

Latin America – a frontrunner in eCommerce growth

In its annual Global Payments Report, Worldpay predicts that the Latin American eCommerce market is set to increase at a CAGR of 19% over the next five years, up from USD 59 billion in 2017 to USD 118 billion in 2021 – the biggest growth of any region.

In addition, by the end of this year, for the first time mobile will represent over one-quarter (27.5%) of all retail eCommerce sales in the region, totaling USD 14.62 billion. Investment in digital infrastructure, better mobile internet access, less expensive data plans and fast smartphone adoption constitute key drivers for sustained mobile commerce growth.

Some of these topics will be discussed at the upcoming ECSE eCommerce Summit and Expo in Mexico at Centro Citibanamex. The G2A PAY team will be attending this key industry event. In case ECSE is on your agenda, don`t miss out the opportunity to get in touch with us. Schedule a meeting here.

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