Fintech in Latin America: Young population and SMEs open market opportunity
Latin America has a vast population of increasingly connected young people who are responsible for a growing demand for accessible financial services. Emerging markets, though home to more than 80 percent of the global population, currently produce only 40 percent of global economic output, according to the IMF.
However, initiatives from local governments and the private sector are set to increase the contribution from these countries. Many Latin American countries, particularly larger economies like Brazil, Mexico, Chile and Colombia, represent an untapped opportunity for technology and fintech. Earlier in January, Business Insider said Mexico is ‘a top neobank market to watch in 2020’, as it highlights a new regulatory framework for fintechs that came into effect in 2020.
The key to market opportunities rests in the large number of micro, small and medium-size enterprises (MSMEs) that make up 90 percent of all businesses in the region. MSMEs face hurdles in securing credit and finance to grow their operations because the local banking systems are still concentrated in the hands of few, and bureaucracy makes processes lengthy and hefty.
Latin America’s largest economies, Brazil and Mexico, are the main leaders in the fintech space, accounting for more than 90 percent of fintech investment in the region. Latin American FinTech raised a total of US$2.66 billion in 94 deals during the last year.
Access to internet services has been growing in Latin America, with 66 percent of its population now connected, compared to the global average of 53 percent. Furthermore, a World Bank report on financial inclusion shows that by 2014, only 54 percent of the adult population in Latin America held an account at a financial institution. Putting these figures together, we see that platforms offering mobile payments, online banking and alternative lending are sure to have a promising market in Latin America.
Brazilian fintech Nubank is the largest player in Latin America, currently valued at US$10bn and with over 20 billion customers. Nubank is a neobank that issues, administrates, processes and transfers payments related to post-paid credit cards and equity investment in other entities. Mexican fintech Konfio taps into the SMEs opportunities by providing unsecured working capital.
The young population is keen on exploring the benefits of innovative technologies, including cryptocurrencies. Binance, the largest crypto exchange in the world, saw an increase of 16% among Brazilian users in Q1 2020 when compared to Q4 2019. Around 60 crypto exchanges are now operating in Brazil today.
Digital currencies pose many advantages to the populations in emerging markets: they are accessible, cheap to use and transfer, safe from theft and immune to inflation — a large issue for many in Latin America as their currencies tend towards volatility, which decreases purchase power. Brazil’s real has been the world’s worst performing currency in 2020, with a devaluation of more than 30 percent.
International companies are looking to provide alternative solutions. Brazio is a secure digital currency developed by London- listed Online Blockchain (LON:OBC) in partnership with ADVFN Brazil to provide the people of Brazil a doorway into the cryptocurrency revolution. Brazio offers the robust features of a secure blockchain and can be mined by anyone with a computer.
Clem Chambers, CEO of Online Blockchain says: “This is a coming of age moment for Brazio and we are excited by both the currency’s development and popularity. Brazio’s excellent security, fast transactions and decentralised governance form a compelling proposition in Latin America, a region which is seeing a continued rise in cryptocurrency adoption.”
“Brazio employs all of the robust features of the bitcoin blockchain, such as excellent security, fast transactions and decentralised governance, but has been customised and improved with the interests of the Brazilian people and economy in mind,” said Oscar Chambers, Lead Developer of Brazio.
Interview with Joao Luis Torres, from ADVFN Brazil: https://irishtechnews.ie/interview-joao-luis-torres-brazio/
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