Fintech in Latin America and Africa is breaking the mold
This is true for a country like Brazil. In 2019, the Central Bank of Brazil created Pix, an instant payment ecosystem that allows individuals, companies and public entities to send and receive payments in seconds, around the clock and 365. In an effort to move the population away from cash, this government-backed standardization led to more financial inclusion and efficiency across the board. Brazilian financial services companies and fintech startups began working with the system, and its introduction meant a lot to local Brazilians, especially the unbanked or in the informal economy, who use their unique chaveor key, to receive payments.
Meanwhile in Nigeria, because of the BVN or Bank Verification Number – a unique 11-digit number that is uniform for an account holder across all institutions – identity theft is much more difficult. In Kenya, where traditional banking was challenging due to geographical distances, Vodafone and Safaricom launched M-Pesa, an SMS mobile payment system that also has branchless banking and helped secure finances for millions of unbanked citizens. The rapid adoption of M-Pesa across East Africa, combined with the popularity of transportation methods such as motorcycles and scooters, spurred the development of new super apps such as Jumia and Glovo that make shopping and business interactions faster and more seamless.
“If I order my wife eggs from Glovo while she’s baking, there will be a knock on her door before she puts the pan in the oven. This is the speed and efficiency I’m talking about that is very hard to encapsulate, because I don’t think Americans – or people who shop in general – are used to that efficiency,” said David Wachira, co-founder and CEO of Waya, a digital payment and banking app for Africans abroad. He also argues that M-Pesa may have reduced corruption and the plague of kickbacks in developing countries, because it is linked to individual mobile numbers.
Since America and its financial institutions and infrastructures have served in a “seated” and hegemonic position for so long, this legacy has continued to plague relationships with money for the underserved, especially in cross-border transactions and remittances. Africa remains one of the most expensive regions in the world to send money to, and many fintech startups are trying to solve these challenges. The infrastructure that will allow us to facilitate affordable cross-border transfers to these destinations just doesn’t exist yet,” said Wiza Jalakasi, Vice President of Merchant Operations at ChipperCash.
“When you go to a bank in South Africa and you have your South African rands and you ask them for Ugandan shillings, they will tell you that we don’t have these because the Ugandan shilling in South Africa is an exotic currency. The only currency you can get with your South African rand is either US dollars, euros or pounds,” says Jalakasi. The US dollar plays an intermediary role in the intra-African financial world. This means that for now, inefficiencies, slow transfers and the loss of money in several currency conversions only further historical global inequalities However, with the right buy-in, these new players may be able to break down some of them.
