The report from the innovation firm and the IDB highlights that these dynamics reflect a stabilization of the market, towards long-term solidity and resilience. The economies that group the largest number of fintech are Brazil, Mexico and Colombia, with 57% of the total.
A recent report by the innovation firm 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 of 3,069 companies in 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 group the largest number of fintech 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 segments (632 companies, 21% of the total companies in the region); Loans (591, 19%), and Business Finance Management (413, 13%) remained the undisputed leaders, continuously occupying the top three positions and experiencing average annual growth of 24%, 31% and 28%, respectively.
Although venture capital investment decreased since the last 2021 report in the region, the percentage of investment in fintech increased within the technology sector, growing 46% to reach US$ 1,873 million.
Startups are diversifying their funding sources and exploring new growth strategies, such as mergers and acquisitions.
Access to financing is a crucial 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 toward more institutional sources of financing, along with the growing presence of venture capital investments – both local and international – suggests cautious optimism.
However, the most notable challenge for the sector continues to be scalability, identified as such by 41% of the fintech companies surveyed within the framework of this study.
The dynamic environment described in the publication, complemented by the ability of the fintech sector 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 that promise to reconfigure the landscape of technological finance 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 actor, with the potential to contribute to the development of a financial architecture aimed at sustainability and the economic and social inclusion of the region.
79% of companies report generating a positive impact on at least one of the Sustainable Development Goals (SDGs). On the other hand, the document highlights the capacity of the platforms to generate processes of change on gender and financial inclusion issues.
For example, in the survey carried out in 2020, 15% of fintech startups in LAC were approaching equal gender representation in their work teams, while in the 2023 survey, 27% of companies in LAC reported have more than 50% women in its 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 are collaborating 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 comparing with 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 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 directed at financial authorities.
Regulation plays a key role in providing a safe and favorable environment for the expansion of fintech , while addressing the challenges and risks inherent to these innovative models, as well as digital and data-driven technologies.
Only 38% of the fintech platforms surveyed within the framework of this study consider that regulation is adequate.
On the other hand, 66% of the 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 efforts of the Inter-American Development Bank through the FintechLAC Initiative to inform public action and promote favorable policy and regulatory environments that allow the development of the fintech ecosystem.
This work was financed by the FintechLAC Network, the first public-private network in the fintech and digital finance sector in LAC.
