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

Publicado em 1 de abril de 2022.

Tempo de leitura 6 minutos de leitura

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 2021, 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

 

Recent investments in Latin American fintech companies

The tailwinds benefitting Brazil’s tech sector since 2018 reached other countries from Latin America in 2021. And this resulted in a record volume of investments in local startups and created a generation of companies worth over USD 1 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:

  1. Nubank;
  2. Neon;
  3. Banco Inter;
  4. C6 Bank;
  5. Ualá;
  6. Klar;
  7. Albo;
  8. Fondeadora;
  9. Flink;
  10. 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

The data confirms the great potential of the market in this region. But there are also other reasons why the rise in investments in fintech companies and embedded finance in Latin America makes so much sense – and 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.

It’s a context that has wrought a great many changes across the most diverse of countries, ranging from digital banking to new means of payment and now, more recently, digital currencies – to mention just three examples.

 

High demand for bankization in the region

The Latin American market has one particular feature that is directly related to the recent wave of investments seen in fintech companies: high demand for bankization.

Even with the surge in financial inclusion driven by the pandemic, these businesses still have the chance to target the over 200 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

There are a number of important topics of interest that are evolving in line with the regulatory changes in Latin America. Two cases in point are open banking and instant payment systems, with Brazil featuring in these areas.

Recently, in December 2021, Brazil entered the final phase of the introduction of open finance, but it’s not the only country in the region to do so. Colombia is also at the forefront of this evolution in Latin America and should have its regulations in place in 2022. The Mexican system is already being rolled out, encompassing around 2,300 institutions. Meanwhile, Chile is also enshrining its own open banking model and should begin the process shortly.

Similarly, when it comes to instant payments, some important developments can be seen across the region. Alongside Brazil, whose Pix system has proved far more successful than ever imagined, Mexico launched a QR code-based system, CoDi, as well as an NFC (near-field communication) system for smartphones.

 

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 2022.

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.

As part of this trend, Dock has been internationalizing and expanding its footprint in the region since 2021. Our latest news in this direction is the recent addition to our team of the Mexican payment solution provider Cacao.

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 2022 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 2021.
  • 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.

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