How Are Fintechs Changing Latin American Banking?
Brazilian financial technology company Nubank announced July 26 that it had raised $400 million in its latest investment round, giving the firm a value of more than $10 billion. The company, founded in 2013, has become Brazil’s sixth-largest financial institution by number of clients and started an international expansion in May. How are fintechs such as Nubank changing the financial services landscape in Latin America and the Caribbean? What are the traits of the most successful fintech companies in the region? How are brick-and-mortar banks and other traditional financial services companies responding to the growth of fintechs in the region, and how is the trend affecting their businesses?
Wally Swain, principal consultant for Latin America at Ovum: “There can be no doubt that fintech is gaining mindshare in the region, at least with investors and policymakers. Statistics on the number of fintech start-ups and the amount of capital they attract are astounding. The fundamental reality of start-ups—especially Internet-based start-ups where barriers to entry tend to be fairly low—is that few will be considered successful, and even fewer will becomes stand-alone businesses, such as Nubank. There is only one Airbnb, three ride-sharing platforms (Uber, Lyft, Didi), and a few commerce platforms (Amazon, eBay, Alibaba, MercadoLibre in Latin America). Banking regulation will mean this ‘law of nature’ will play out locally, not globally (so one or perhaps two Nubanks per market), but that will be the only difference. Many or perhaps most of the successful fintechs will be absorbed into existing businesses, probably traditional banks. The banks have significant influence over regulators in most Latin American countries (if not everywhere) and can shape regulation to retain their advantages in the marketplace. Regulators’ understandable concerns about money laundering in the region and about cybersecurity and privacy are but three items of the list of issues that arise once fintech evolves from small-scale experiments to something that might seriously threaten traditional banks’ market shares. It would be easier for…”Read More
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About the Financial Services Advisor
Covering Latin America’s banking and insurance sectors, remittances trends and data, micro lending issues, new technologies in the industry, anti-money laundering regulations, and much more, the Inter-American Dialogue’s biweekly Financial Services Advisor, a sister publication of the Latin America Advisor, gives readers fresh insight and diverse viewpoints from financial sector leaders. To subscribe or for more information, contact Erik Brand, publisher of the Advisor, at firstname.lastname@example.org.