2021 was “the year” for investments in fintech companies in Latin America. So what does 2022 have in store?

Published on Apr 01 2022.

7 minutes reading

In recent years, and particularly in 2021, we have witnessed a growing wave of investments in Latin American fintech companies. Innovation is the driving force for many new startups attracting international interest and for the unprecedented evolution of the Latin American financial sector. But are these billionaire investments a bubble about to burst, or are they part of a trend that is likely to continue throughout 2022 and make a meaningful contribution to economic development in the region’s countries?

The present scenario indicates – and I agree – that the right answer is without doubt the second option. In other words, we can expect this new year to be just as promising as the last one, in which we will not just witness, but will actually take part in a development that is increasingly important for Latin America.

Article written by Anderson Olivares, Country Manager, Dock Mexico

The opinions expressed in this article are solely those of the author and do not represent those of Dock.

Recent investments in Latin American fintech companies

The tailwinds benefitting Brazil’s tech sector since XNUMX reached other countries from Latin America in XNUMX. And this resulted in a record volume of investments in local startups and created a generation of companies worth over USD XNUMX billion.

According to CB Insights, the region attracted USD 14.8 billion in investments in the first nine months of 2021. Brazil is home to the top-ranked unicorns in the region, followed by Mexico, but the same trend can also be seen in countries like Argentina, Colombia, Chile, and Uruguay.

If we look specifically at investments in fintech companies and digital banks from Latin America, a BPC survey found that the top ten companies in 2021 were:

Nubank;
Neon;
Banco Inter;
C6Bank;
Ualá;
Klar;
Albo;
Fondeadora;
Flink;
Brubank.

And I’m proud to say that Dock technology played a part in the story of over half of these companies!

Thanks to high investment volumes, these businesses have grown considerably in recent months and been able to grow their innovation base and expand their service portfolios, attracting more users. So much so that the same BPC survey found that today the region’s top ten fintech companies account for over 90% of all customers in Latin America.

What’s behind the high investments in Latin America’s fintech companies

These data demonstrate the great potential of the market in this territory. In addition, there are several other reasons why the increase in investments in fintechs and businesses with integrated finance (Embedded Finance ) in Latin America is a movement that makes perfect sense – and that is here to stay.

Digitization of the financial ecosystem

First of all, it’s worth taking a look at the way the global financial ecosystem is changing thanks to new technologies and other factors.

In this context, we are witnessing several transformations in the most diverse countries, from the Digital Banking, the new means of payment and, more recently, by the digital currencies – just to quickly cite a few examples.

High demand for bankization in the region

The Latin American market has a particular characteristic that is directly related to the investments in fintechs that we have seen in recent times:the high demand for banking.

Even with the surge in financial inclusion driven by the pandemic, these businesses still have the chance to target the over XNUMX million Latin Americans who do not yet have access to formal banking and financial services.

Progress and easing of regulatory issues

Thanks to some positive interventions made by regulatory agencies in the financial markets of different countries in the last few years, the regulatory context is also helping to drive investments in Latin American fintech companies.

In Brazil, for example, the Central Bank has created mechanisms designed to decentralize the system and permit the entry of more players.

In Mexico, the financial technology law regulates electronic payment institutions and aims to lower the entrance barriers in the country.

Evolution of topics like open finance and instant payments in different countries

Hand in hand with the regulatory issue, we have also seen different relevant themes evolve in several Latin American countries. This is the case of Open Banking and instant payment systems – in which Brazil, for example, has occupied a prominent position.

Recently, in December 2021, the country entered the last phase of the implementation of the Open Finance, but it is not the only one to advance in this direction. Colombia is also leading this evolution in Latin America and should have the regulation ready by 2022. The Mexican system is also in the process of implementation and covers about 2.300 institutions. Chile is already implementing its Open model Banking and should start this process soon.

Likewise, in relation to instant payments, important movements are also taking place in the region. In addition to Brazil, which had a unique case of success with thePixLast year, Mexico launched CoDi in 2019, a system based on QR Code and near-field communication (NFC) telephone technology.

What’s in the pipeline for 2022?

For all the reasons given above, investments in Latin American fintech companies are set to stay strong throughout XNUMX.

It’s a region that has huge potential. It’s already a hotbed of business opportunities, and there is still plenty of room for newcomers keen to join the financial ecosystem and help develop the region.

Following this same flow, since 2021, the Dock is experiencing a process of internationalization and expansion in the regionspan style="font-weight: 400;">. The last action in this direction included the Cacao's arrivalto our team, a Mexican payment solutions platform.

By offering the technology needed to speed up the pace of progress, Dock is taking the helm in the movement to transform the financial world and lead the region to a more prosperous future. And in XNUMX this will still hold true.

Investments in Latin American fintech companies: what you saw in this article

2021 saw record investments in Latin American startups: USD 14,8 billion was invested between January and September of XNUMX.
These investments drove unprecedented growth for these businesses in recent months, allowing them to grow their innovation base and expand their service portfolios.
There are several factors behind this movement, including high demand in the region for bankization, progress in regulatory issues and related issues in different countries, and the digitization of the financial system.
For all these reasons, this movement is set to continue in 2022, and Dock is helping drive this transformation, internationalizing and expanding its footprint in Latin America and helping the region’s businesses speed up their growth.