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Fintech in Uruguay is an emerging sector with an annual growth rate of 44%

by | Jul 6, 2024

Fintech is gaining relevance worldwide, and Uruguay is consolidating itself as an emerging sector market. According to a joint report by the Inter-American Development Bank (IDB) and Finnovista, Fintech in Uruguay has experienced an average annual growth of 44% between 2017 and 2023.

The survey highlighted the implementation of innovation hubs. It noted that the fintech ecosystem is developing with “remarkable dynamism” in the country, as well as in Peru, Ecuador, the Dominican Republic, Costa Rica, and Guatemala. The joint report specified that the countries went from representing just 7% of the regional total in 2017, with 48 ventures, to adding almost 15% with the 455 surveyed in 2023.

This improvement is associated with the regional situation since technological finance startups grew more than 340% in the last six years, going from 703 to 3,069 throughout the region during that period under examination.

As for the big players in the region, Brazil continues to have the most significant number of fintechs, with 24% of the total, followed closely by Mexico (20%) and Colombia (13%). Argentina and Chile are further behind(both with 10%), while fintech in Uruguay represents 1.69%.

What segments do fintechs target?

The report investigated the segments that lead the number of platforms in the region, and once again, at the top of the list are payments and remittances, with 21% of the total companies, among which is the Uruguayan fintech unicorn dLocal.

Loans, with 19%, and business finance management, with 13%, complete the fintech offerings. The three items have experienced average annual increases of 24%, 31%, and 28%, respectively.

As for the public, more and more regional ventures focus on underbanked or unbanked people and companies, the IDB and Finnovista observed, highlighting that this “shows the positive impact of this sector on financial inclusion.”

Currently, 57% of fintech companies target this population group; in 2021, that percentage was 36%. Specifically, the loan segment leads in serving unbanked people, while payments and remittances represent the segment that most serve underbanked small and medium-sized businesses.

Technology and financial inclusion

Anderson Caputo, head of the IDB’s connectivity, markets, and finance division, said the report designs public policies and “reaffirms the enormous potential of financial technology to close financial inclusion gaps in the region.”

Meanwhile, Fermín Bueno, co-founder and Managing Partner at Finnovista considers fintech as “a key driver for innovation and economic growth in the region, but also for financial inclusion and accessibility to financial services for millions of people and small businesses.”

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A promising future

The future of fintech in Uruguay and Latin America appears promising, driven by a convergence of factors fostering innovation, financial inclusion, and economic growth. With its robust digital infrastructure and favorable regulatory environment, Uruguay is emerging as a critical player in the Latin American fintech ecosystem.

In Uruguay, the government’s proactive stance on digital transformation and financial inclusion has created a conducive environment for fintech startups. Initiatives such as the Central Bank of Uruguay’s e-peso pilot program, which explores digital currencies, demonstrate the country’s commitment to embracing fintech advancements. Moreover, Uruguay’s high internet penetration rate and well-educated workforce provide a strong foundation for developing and adopting fintech solutions.

Across Latin America, the fintech sector is experiencing exponential growth. The region is characterized by a large unbanked population and a high reliance on cash transactions, presenting a significant opportunity for fintech companies to provide accessible and affordable financial services. Digital banking, mobile payment solutions, and blockchain technology are gaining traction, driven by the increasing smartphone penetration and a young, tech-savvy population.

Brazil and Mexico lead the charge, with vibrant fintech ecosystems supported by substantial investment and regulatory support. Brazil’s open banking regulations and Mexico’s fintech law are pivotal in fostering innovation and competition. Other countries, such as Argentina, Chile, and Colombia, also witnessed a surge in fintech activities spurred by supportive regulatory frameworks and entrepreneurial dynamism.

The COVID-19 pandemic further accelerated the region’s adoption of digital financial services. Social distancing measures and the need for contactless transactions have highlighted the importance of fintech in ensuring financial continuity and resilience.

Looking ahead, the fintech landscape in Uruguay and Latin America is poised for continued growth. Collaboration between governments, regulatory bodies, and private sector stakeholders will be crucial in addressing cybersecurity, data privacy, and financial literacy challenges. As fintech continues to evolve, it has the potential to transform financial services, promote economic inclusion, and drive sustainable development across the region.

The future of fintech in Uruguay and the broader Latin American region is exceptionally bright, with significant growth driven by innovative technologies, regulatory support, and a strong focus on financial inclusion. The impressive annual growth rate of 44% in Uruguay’s fintech sector underscores the country’s emerging status as a key market within the region. As fintech companies expand their reach and services, targeting underbanked and unbanked populations, the potential for transformative economic impact becomes even more pronounced. By fostering collaboration among governments, regulatory bodies, and private sector stakeholders, fintech in Uruguay and Latin America can achieve its full potential, ensuring sustainable development and enhanced financial accessibility for millions of people and businesses.

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