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The Fintech Industry in Latin America: Four Trends in 2024

by | Mar 9, 2024

The Fintech industry in Latin America has experienced exponential growth in recent years. In 2022, the sector received an investment of more than 1.6 billion dollars, 120% more than the previous year, according to a study by the Inter-American Development Bank (IDB).

The Fintech industry in Latin America has experienced exponential growth in recent years. In 2022, the sector received an investment of more than 1.6 billion dollars, 120% more than the previous year, according to a study by the Inter-American Development Bank (IDB).

This development is due to a series of factors, such as the growing adoption of technology by consumers throughout the region, the need for financial inclusion, and favorable regulation of the sector.

These are four trends that will define the Fintech industry in Latin America in 2024:

Growth of digital payments

Digital payments will continue to increase in popularity in Latin America. According to a study by the consulting firm McKinsey, the value of digital payments in the region will reach 2.5 trillion dollars in 2025. This trend is mainly due to the following variables:

  • Greater penetration of smartphones
  • Improvement of telecommunications infrastructure
  • Growing adoption of contactless payment solutions

Development of open banking

Regarding banking, Mario Aranda, General Manager of Ionix Colombia, stated that some of his target clients are in this sector since the trend is gaining more and more strength in the Latin American territory. This initiative allows users to share their financial data with authorized third parties, such as Fintech companies, to access new financial products and services. “One of the relevant aspects of Fintech is collaboration. It is a new dimension that is not traditional in this financial world,” commented Mario Aranda, General Manager of Ionix Colombia.

The growth forecasts are very optimistic. According to the Open Banking Report Market by Finance Services and Distribution Channel by Allied Market Research, the open banking market in the world is expected to reach $43.2 billion by 2026.

Three factors that will drive its development are:

  1. An increase in digital banking adoption
  2. Collaboration between Fintech companies and traditional banks
  3. Greater demand for inclusive financial services

The analyses indicate that new banks and the Fintech industry will adopt this initiative, leading to new innovative financial products and services.

Cryptocurrency boom

Cryptocurrencies are also gaining popularity in Latin America, as 46% of banked people in the region are willing to make payments with Bitcoin.

Cryptoasset companies are gradually evolving into comprehensive financial technology providers that act as one-stop shops for investors, consumers, and other companies.

Money transfers and payment processor services are the activities that are most carried out through payments in cryptoassets. In 2024, it is estimated that the number of users will increase considerably, as will the companies that adopt them in their financial processes.

Attention to small and medium-sized businesses

The integration of Fintech business models can offer several benefits for small and medium-sized businesses in Latin America, including:

  • Technological modernization: They can help companies modernize their financial processes and systems, improving efficiency and competitiveness.
  • Greater access to financial services: Fintech business models can offer electronic payment solutions, personal and business finance management, transfers, and remittances, among other services.
  • Process optimization: Fintechs can help optimize financial processes, improving their efficiency and reducing costs.
  • Greater flexibility: Fintech companies can offer more flexible and personalized financial solutions than those offered by traditional banks, which can better adapt to the needs of companies.

Under this context, Mario Aranda assured that Ionix is an excellent ally for small and medium-sized companies in Colombia and Latin America, with different service models and financial ecosystems that could be optimized according to each.

“Iconix’s target clients are found in banking, insurance companies, organizations in the retail sector, and, in general, entities with high transactionality and a large volume of users, where the number of transactions means that they require many aspects of security and need access to data related to reconciliation or risk measurement in open banking issues. This is where Ionix presents itself as a response to a strong growth in the population that is now immersed in the internet and the use of technologies and mobile devices,” added Mario Aranda.

It is expected that in 2024, the Fintech industry in Latin America will focus on meeting the needs of SMEs. These companies dedicated to financial solutions will launch new developments adapted to the needs of small and medium-sized businesses, such as loans, insurance, and financial management services.

Regulation, a pending issue

The regulation of Fintech in Latin America is in the process of evolution. In recent years, governments in the region have taken steps to create a regulatory framework that promotes financial innovation and protects consumers. The following factors are being taken into account:

  • Consumer protection
  • Promotion of innovation
  • Equity

Some countries in Latin America, such as Brazil and Mexico, have enacted specific laws to regulate Fintech activities. Others, such as Colombia and Argentina, have taken a more pragmatic approach, incorporating Fintech activities into existing regulations. Furthermore, due to the sector boom, other nations are expected to join in regulating these companies.

The fintech industry in Latin America has a vital role in developing the region’s economy. In 2024, the sector is expected to continue increasing, driven by several trends, such as the growth of digital payments, the development of open banking, the rise of cryptocurrencies, and the focus on SMEs.

In conclusion, the fintech industry in Latin America is poised for continued growth and innovation in 2024 as it navigates through an evolving landscape shaped by technological advancements, regulatory developments, and shifting consumer preferences. With a focus on digital payments, open banking initiatives, the burgeoning cryptocurrency market, and tailored support for small and medium-sized enterprises, fintech companies are primed to transform the region’s financial services landscape. As governments work towards establishing comprehensive regulatory frameworks, the industry stands ready to drive financial inclusion, promote innovation, and contribute significantly to the economic development of Latin America.

 

Contact LATAM FDI to discuss your foreign direct investment plans in Latin America.

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