Durrant Pate/Contributor

A new study has revealed that the fintech ecosystem in Latin America and the Caribbean has grown considerably to the extent that they now exceed 3,000 in 26 countries in 2023.

In fact, the study reports registered growth of more than 340 per cent in the number of technological finance start-ups created in the last six years, growing from 703 companies in 18 countries in 2017 to 3,069. The joint study by the Inter-American Development Bank (IDB) and Finnovista was presented during the fifth annual meeting of FintechLAC now being held in Bogotá, Colombia.

It shows that Brazil, Mexico and Colombia account for 57 per cent of total companies. Brazil continues to be the country in the region with the highest number of fintech startups with 24 per cent of the total. 

Closer look at the numbers

Mexico follows with 20 per cent, Colombia with 13 per cent and Argentina and Chile with 10 per cent each. The countries with the highest growth in the last two years were Peru with 5.3 per cent of the number of companies, followed by Ecuador with three per cent and the Dominican Republic with 2.1 per cent.

Peru, Ecuador, the Dominican Republic, Uruguay, Costa Rica and Guatemala constitute a set of emerging markets that are developing with notable dynamism, registering an average annual growth of 44 per cent between 2017 and 2023. These markets went from representing just seven per cent of the regional ecosystem in 2017 (48 ventures) to almost 15 per cent in 2023 (455 ventures).

The leading segments in terms of the number of platforms in the region continue to be payments and remittances with 21 per cent of the total companies, loans with 19 per cent, and corporate finance management with 13 per cent. These three segments have experienced average annual growth of 24 per cent, 31 per cent, and 28 per cent, respectively.

Serving underbanked or unbanked population

The results of the study, titled ‘A Consolidated Ecosystem with the Potential to Contribute to Regional Financial Inclusion‘, reflect market stabilisation and progress towards long-term solidity and resilience.

More than half of fintech companies serve the underbanked or unbanked population and the region has experienced dynamic regulatory development with an increase in the number of regulatory frameworks for the development of segments.

These segments include open finance and the use of regulatory innovation structures such as innovation hubs and regulatory sandboxes. Fintech is the sector attracting the most venture capital investment.

According to the report, the current growth of the fintech ecosystem in the region is due to high demand from financial consumers, the state of the digital financial infrastructure and the availability of a specialized workforce. Consolidation and stability of the ecosystem is not only reflected in an increase in the number of emerging companies, especially in countries where the sector was incipient but also in the diversification and distribution in terms of segments, business models, capitalisation and enabling technologies.

Data from the Caribbean

This edition of the report has data from 26 countries and includes for the first time Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Suriname and Trinidad and Tobago. Its rigorous mapping has identified 3,069 fintechs. 

Additionally, it conducted surveys of companies in the fintech ecosystem, regulators and investors. A total of 404 viable responses were obtained from companies, representing 13 per cent of the total universe of fintech companies, with a margin of error of 4.54 per cent and a confidence level of 95 per cent. 

Also, 25 investors and 32 financial authorities responded to the IDB and Finnovista survey, which was carried out in November and December 2023.

Increasing number of fintech startups

The report cites an increasing number of fintech startups in Latin America and the Caribbean are targeting underbanked or unbanked people and companies, which shows the positive impact of this sector on financial inclusion. Currently, 57 per cent of fintech companies target this population group, while in 2021 this percentage was 36 per cent. 

The loan segment leads in serving unbanked people, while payments and remittances represent the segment that most serve underbanked small and medium-sized businesses. 

Fermín Bueno, co-founder and managing partner of Finnovista, highlighted, “The Fintech ecosystem in Latin America and the Caribbean is consolidating as a key driver for innovation and economic growth in the region, as well as for financial inclusion and accessibility to financial services for millions of people and small businesses. Our commitment is to continue supporting this development, promoting collaboration between all actors in the ecosystem and paving the way for a more inclusive and prosperous future.”