Brazil and Mexico are the FinTech champions of Latin America

Financial institutions, multinationals and investors worldwide are racing to understand how FinTech can benefit their businesses. Early adoption of FinTech has, in only a few years, turned into a relatively steady early global maturity in 2017 led by China and India. Whilst many would think that the Silicon Valley-driven United States would be leading the way across the Atlantic, Brazil is the FinTech champion of the Americas. 

Brazil is well endowed when it comes to digital. It boasts the most technologically orientated population in Latin America, of which 85% live in urban areas. However, 40% of this population is said to be excluded from one of the world’s most concentrated banking system. This combination has proven the perfect melting pot for the early adoption of FinTech.

Brazil is a world leader in the early adoption of FinTech and has made dramatic leaps forward considering it has just emerged from recession. With the highest number of FinTech start-ups in Latin America, the country’s traditional banking sector is expecting to feel the effects of this disruption on a larger scale than elsewhere in the continent. 

Latin America as a whole however has many of the same inherent issues as Brazil. High interest rates and low access to capital and a lack of financial services in general have created a push to develop FinTech across the board. In combination with a rapidly transforming and urbanizing population, Brazil’s early adoption of FinTech will continue to demonstrate to other Latin countries the benefits of the new technologies. 

Beyond being a role model for its Latin neighbours, Brazil is turning heads in the US as well. According to EY’s FinTech Adoption Index in 2017, the US adoption of FinTech as a percentage of the digitally active population is 33%, the same as the global average. Brazil however is ranked as the worlds fourth largest adopter of FinTech with a ranking of 40%, only behind China, India and the UK. 

Accordingly, this has North American investors scrambling to South America’s largest economy, and Brazil is ready to show off. In September this year, São Paulo will play host to the FinTech Roadshow, drawing US tech investors, companies, consulting firms and start-ups to some of Brazil’s leading FinTech institutions. The event will be held between the US Consulate in Brazil and Hotel Unique, comprising of two days of meetings and networking, followed by the full day conference ‘Fintech in LATAM: The Future of Finance’. 

The event will be run by Miami-based strategy consultancy PHM International in conjunction with LatinFinance. PHM International works both with the public and private sectors within emerging markets and developing economies. The firm, formed in 1997, also initiates trade missions with the U.S. Trade and Development Agency, which has allowed this event to be classified as a Certified Trade Mission. 

"Brazil's burgeoning FinTech sector represents real opportunities for U.S. investors and companies," said Hank Kearney, President of PHM International. "Brazil is home to the largest number of FinTech companies in all of Latin America and ranks highest in EY's 2017 FinTech Adoption Index in areas such as money transfers and payments, financial planning, savings and investments, and borrowing.” 

EY report highlights Nubank’s success

The Brazilian FinTech sector is paving the way for Latin America in terms of money transfers, payments, financial planning savings as well as in investments and borrowing. Included in the EY 2017 report is the example of Nubank, a Brazilian FinTech powered financial institution which has successfully disrupted the Brazilian financial sector. 

Launched in 2013, Nubank is the first fully digital and branchless credit card company in Brazil which developed their entire technology stack in-house. The company aims to attract customers who want to use mobile interfaces to manage their finances, and Nubank utilises online communication methods to provide round the clock customer services. The bank has grown substantially since its inception, driven by its exceptional customer service which has attracted a wealth of social media attention. 

David Vélez, Founder and CEO of Nubank, commented on the hostile environment in which Nubank was conceived and of the challenges which they overcame; “When I came to Brazil, all I heard was that I couldn’t start this type of business here, the big banks wouldn’t allow it and the regulation was too complicated. Thirty different market specialists all said, “Forget it, you are a foreigner and you just don’t understand.”

“We built Nubank despite all conventional wisdom, in the midst of Brazil’s worst economic crisis. Today, more than nine million people have applied for Nubank. These results should motivate every entrepreneur to keep challenging the status quo,” Vélez concluded.