Although Latin America (LatAm) may have introduced Fintech services after they had been established in more advanced economies like the US and in Europe, the region is growing fast because of the launch of several financial technology initiatives.
While it may be difficult to accurately assess or determine the long-term impact of COVID-19 in the LatAm region, it has become clear that the demand for innovative Fintech platforms and services is growing steadily.
Smaller financial service providers across Latin America and in South American countries like Argentina and Brazil are now digitizing and upgrading their legacy platforms. Many SMEs are also looking to obtain affordable Fintech lending services in order to make it through these challenging times.
The Fintech industry’s rapid expansion has put extra pressure on Latin and South American regulators to introduce appropriate regulations to ensure that financial services providers are operating in a compliant and responsible manner.
But regulators must be careful not to stifle innovation, by adopting a balanced approach. At present, Mexico seems to be leading the charge when it comes to developing a regulatory framework for Fintech in the LatAm region, with the introduction of its comprehensive 2018 Fintech Law.
The law applies to most financial technology businesses in the trillion-dollar economy, which includes crowdfunding platforms, digital wallet providers, and transactions performed using digital assets like Bitcoin (BTC) and Ethereum (ETH).
Mexico has also introduced several new financial laws that aim to regulate service providers as they facilitate transactions using Fintech platforms. The law also supports a regulatory sandbox for regulated and non-licensed Mexican businesses.
Brazil is also catching up with Mexico in terms of Fintech adoption. Barcelona’s Fintech Belvo recently secured $10 million in capital to recruit more staff, and is planning to launch in Sao Paulo, Brazil.
Brazilian Fintechs are also expanding their international footprint. Via Varejo, the nation’s largest retailer, recently acquired Boston-based Fintech AirFox for an undisclosed amount.
Brazilian digital wallet PicPay recently surpassed 20 million downloads sooner than expected, due to COVID-19. The country’s regulatory authorities have also used blockchain or distributed ledger technology (DLT) to streamline various operations.
Brazil’s financial regulators are working on a DLT-enabled data-sharing platform to conduct background checks on politicians and corporations.