In a region united by language, the word “fintech” can have very different meanings
Hi there! Daniela here, reporting from Mexico City. I’ll be sharing this newsletter about the ins and outs of Latin American tech every two months, starting today.
Having been Latin America’s largest technology sector in terms of investment for the past decade, fintech paints a canvas large enough to depict the region’s differences more clearly. During the early days of the industry, Brazil and Mexico attracted most of the investor money because their large populations—nearly half of them unbanked or still dependent on cash—meant a wild west of opportunity for all. As deals poured in for companies like Brazilian challenger bank Nubank, which debuted on Nasdaq in 2021, and Mexico City-based Clip, now a payments unicorn backed by SoftBank, fintech in Latin America was typically reduced to what these huge countries needed and created.
But fintech’s breadth can be seen in smaller countries. Chile is a good starting point, as it has some of the widest differences. The legacy of the last 50 years – 18 under a free market dictatorship, 32 under democratic rule – can be seen in the development of the country’s financial technology. Private banks coexisting with state-backed ones jointly support an advanced digital financial system. Contactless payment terminals are available throughout the country, and anyone with a national ID number can register for a simple savings account online, provided by the state bank. Almost 75% of all Chilean adults have a bank account – the highest share in Latin America, where the average is about 50%.
No wonder Chile’s fintech startups are not pitching the same products as some of the most prominent fintech companies in other countries. While digital bank Nubank has grown in Brazil and Mexico, promising to free people from the hassle of going to a physical bank branch, challenger banks are just starting to emerge in Chile. “Traditional banks have done a good job of going digital, so challenger banks don’t really have much to offer,” said Camila Perry, who works at MercadoPago in Santiago.
The country’s fintech companies also do not aim to bank the unbanked or to spread the gospel of digital payments; 90% of all internet users in the country already have a bank account. In fact, MercadoPago, a payment solution that is part of Argentine e-commerce giant MercadoLibre, entered the country only recently, and is struggling to compete with other digital payment companies. That’s a problem MercadoPago doesn’t have in Mexico, for example, where the solution has been widely adopted by small businesses.
Rather, Chilean fintech is growing in investment platforms. Clemente Yapur, head of positioning and brand marketing at the Chilean office of global nonprofit Endeavor, told me a few weeks ago that Fintual sparked the trend. Founded in 2014, the company allows users to invest in mutual funds and ETFs for their retirement plans through an online platform. It has become quite popular in Chile, and has increased the number of users after the pandemic. Mexico, a market they entered recently, has not grown as much. It is a country where other investment platforms have tried and so far failed to significantly grow the tiny group of individual stock market investors – barely a million in a country of 130 million people.
According to Yapur, Fintual’s growth spurt almost coincided with a controversial political move in Chile: during the Covid-19 pandemic, the government cashed out the national pension fund several times. “People are now worried about their retirement savings,” Yapur said. As Fintual continues to grow – it now has over 85,000 users – Chile may be taking off as one of the few countries in Latin America where investment platforms are actually popular. A rarity in a region where personal investment is still uncharted territory.
