Regardless of the product in demand—whether it is a bank transaction, a fancy dinner brought to your home, independent online classes, crafty handmade jewelry, or anything you come up with on the spot— the Latin American fintech entrepreneurs have delivered innovative solutions to the growing gig industry. What initially started as an alternative to boost e-commerce, has now evolved into one of the most promising financial ecosystems worldwide, and Latin America is paving the way for the rest of the world to follow through and learn from their success.
But first, why is fintech relevant?
In very general terms, fintech refers to the development of new technologies applied to the ever-changing economy. The main goal is to provide more efficient and friendlier financial services to both businesses and consumers. Rather than a luxury, fintech has positioned itself as a new necessity in the commercial hubs.
An astounding aspect of this is the fact that the most renowned banks and similar companies are not taking the lead: entrepreneurs are the true force behind the uprising of this new modus operandi. Instead of sticking to the traditional financial systems, they have employed more experimental platforms and concepts that have managed to engage with new audiences and propel emerging businesses.
Why are people turning over to it?
There are many factors contributing to its popularity. On the consumer’s side, these are just some examples:
- The wide array of gig services offered. Perhaps the most common example of a fintech appliance is mobile banking, with its options to transfer money, pay services and check billing statements on the go. This, however, has expanded into other areas, such as food delivery, insurance or just any gig consumers may be looking into at the moment.
- Consumers’ growing preference for online shopping and the variety of payment options available.
- The various conveniences people have found in smartphone apps and their accessibility.
- The effective and speedy responses consumers may get from their sellers.
- Safe payments.
As for sellers, these are some of their benefits:
- The possibility of having a strong online presence without necessarily investing in a physical store or office.
- Offer services, gigs, and similar products that are on-demand, but would not be as profitable if it were to comply with the requirements that certain companies, banks, or other suppliers.
- Mobile payments are quick, direct, and have a lower interest than what banks offer.
- Safety in receiving their payments.
- The possibility to engage with audiences that are often overlooked by traditional financial systems, something that Latin America has been particularly successful at. More of this will be delved in this article, just keep reading.
And what is Latin America doing differently?
Of course, not all of this comes without its respective challenges, propelling important changes in the industry and generating new needs. Luckily for Latin America, entrepreneurs have taken their chances in experimenting with these new opportunities and providing creative solutions.
The first challenge could have been the fact that, as BizLatin Hub points out, Latin America has wide “‘unbanked’ and “under-banked” populations (the millions of people in local communities who do not own a bank account). This condition excludes them from various commercial centers and the possibility to interact with wider audiences.
“Mexico and Brazil, at this moment, are nurturing the largest fintech ecosystems in the region”, as said by BizlAtin Hub.
This has happened partially because governments are allowing preferential regulatory treatment for entrepreneurs and their investors. Fintech saw an opportunity in this by developing payment options that include cash, debit cards, and some of them even bartering. This has opened many possibilities for both sellers and consumers, supporting modern e-commerce and more creative industries to emerge.
The ever-growing history of these online transactions has generated a type of credit in its own terms which, consequently, has inaugurated the emergence of neobanking, an exciting option for upcoming financial initiatives to investigate. Moreover, it translates into a mode of an economy with a place for the populations that had been previously overlooked by renowned financial institutions, achieved by providing them with alternatives that will allow them to join the modern financial ecosystem and profit from it.
Another blessing in disguise for Latin American fintech is the fact that they implement the expansion-mindset from minute one. As Nathan Lustig states for Crunchbase, “startups in the US have the advantage of a vast and diverse market where they can sell their products. Outside of Mexico and Brazil, growing startups in Latin America often struggle to become profitable while operating within just one country”. A fact that has led them to plan ahead for adapting to different systems, cultures, and regulations as a survival necessity.
Regardless of its recent emergence in our economy, fintech has proven to be a powerful strategy that is bound to prevail and transform our financial ecosystem.