Analytics  |  Expertise  |  Technology   |   03.11.2023

The Future of FinTech in Latin America 2023: Insights and Opportunities

Latin America is a region with a fragmented market, but it is also a region with enormous potential for the FinTech industry. According to a recent report published by Finextra Research, the Latin American fintech market continues to flourish, and while many companies have been in the space for over a decade, newcomers have been entering at an exponential rate for the past five years. Fresh findings by Newtopia reveal that VC investment in FinTech startups in Latin America has grown by 690% over the past five years, representing a total of $2.1 billion in 2019. This growth has catalyzed a FinTech movement, namely digital wallets in LatAm, that is challenging not only the incumbents but also solving critical problems in different areas of the industry. 

Cloud-based financial services across Latin America

Cloud has been a key driver of improved financial inclusion in Latin America. The B2B market for cloud will become an opportunity across Latin America. 

Cloud adoption is becoming increasingly mainstream in Brazil’s financial services and fintech industry, as companies are looking to reduce costs, improve scalability, and access new technologies. Cloud-based solutions are being used to automate processes, improve customer experiences, and enable faster, more secure payments. Additionally, cloud services are being used to enable the development of APIs and open banking solutions, which can help to increase financial inclusion. 

WaaS, BaaS: Software-as-a-service solutions in FinTech

One of the core problems that fintech companies in Latin America are trying to solve is renovating the region’s dated financial and payments infrastructure. SaaS-like software solutions for financial businesses like banks and NBFIs (non-banking financial institutions) have become an increasingly in-demand business model in Latin America. Cloud-based services like WaaS and BaaS enable any company that wants to offer banking products and services to do so for its customers in an efficient and secure manner, without needing to alter its operations or infrastructure, or request a license. 

Wallet-as-a-Service (WaaS): A Solution for Budding Financial Businesses in LatAm

Wallet-as-a-Service (WaaS) is a cloud-based solution that enables businesses to offer digital wallets to their customers without the need for significant investment in infrastructure or technology. WaaS is similar to BaaS, but it focuses on providing digital wallet services instead of banking services. WaaS providers like Wallet Factory offer a range of services, including wallet creation, management, and maintenance, as well as integration with third-party services and APIs. 

WaaS is particularly beneficial for budding financial businesses in Latin America, including banks and non-bank financial institutions (NBFIs), as it enables them to offer digital wallet services to their customers without the need for significant investment in infrastructure or technology. WaaS providers can help these businesses to quickly and easily launch digital wallet services, which can help to improve customer engagement and loyalty, increase revenue, and reduce costs. 

Here are some of the of the WaaS benefits for budding financial businesses in Latin America:

  • Cost-effectiveness. WaaS is a cost-effective solution for businesses that want to offer digital wallet services to their customers. WaaS providers offer a range of pricing models, including pay-as-you-go and subscription-based models, which can help businesses to manage their costs effectively.
  • Scalability. WaaS is a scalable solution that can grow with a business. WaaS providers offer a range of services, including wallet creation, management, and maintenance, as well as integration with third-party services and APIs, which can help businesses to scale their digital wallet services as their customer base grows.
  • Customization. WaaS providers offer customizable solutions that can be tailored to meet the specific needs of a business. WaaS providers can help businesses to create digital wallets that are branded and customized to meet the needs of their customers.
  • Security. WaaS providers offer secure solutions that are designed to protect customer data and prevent fraud. WaaS providers use advanced security measures, including encryption and multi-factor authentication, to ensure that customer data is protected at all times.

All in all, WaaS is a promising solution for budding financial businesses in Latin America that want to offer digital wallet services to their customers. WaaS providers offer cost-effective, scalable, customizable, and secure solutions that can help businesses to improve customer engagement and loyalty, increase revenue, and reduce costs. As the FinTech industry continues to grow in Latin America, WaaS will play a crucial role in providing financial services to the underserved and unbanked population.

Digital wallets in LatAm: Their role in improving financial inclusion 

Digital wallets have become increasingly popular worldwide and in particular in emerging markets like Latin America. Truth be told, the importance of digital wallets in LatAm in improving financial inclusion in the region cannot be overstated. As one of the key players of the Juniper Research Competitor Leaderboard with its digital wallet platform, Wallet Factory has gained first-hand insights revealed by this FinTech analytics powerhouse. In its new Digital Wallets survey, the business research company projects the total value of digital wallets transactions will rise from $9 trillion in 2023 to surpass $16 trillion in 2028, a rise of 77%. So, for banks and retail companies alike, integrating digital wallets in LatAm across their business operations with customers will surely help get a competitive edge in the long run.

Here are two important things to consider highlighting the prominence of digital wallets and their importance in the region:

  1. The usage of digital wallets in LatAm is expected to increase by 20% every year until 2025, surpassing $70 billion in value, which is around 10% of Latin America’s digital commerce market, as stated in the report of Intelligent CIO. Argentina and El Salvador lead in this area, with their 23% share, followed by Bolivia with 14%; Peru, 13%; Uruguay, 12%; Brazil, 11%; and Mexico, 8%. Digital payments are the area of fintech that is most widely used, accounting for nearly eight in 10 users in 2022. 
  2. The adoption of digital wallets in LatAm has helped to reach parts of the population who were unbanked or underbanked. Greater data access has been shown to help financial institutions reach the needs of the unbanked and underbanked. Open access to better data can help improve financial inclusion payments by enabling fintechs in LatAm to make more informed decisions. Better access to data can allow fintechs to understand customer needs and preferences, and can help to identify potential customers, as well as potential areas of growth and opportunities. 

At the end of the day, digital wallets have become an essential tool for improving financial inclusion in Latin America. The adoption of digital wallets for banks and NBFIs has helped to reach parts of the population who were unbanked or underbanked, and greater data access has been shown to help financial institutions reach the needs of the unbanked and underbanked. As the fintech industry continues to grow in Latin America, digital wallets will play a crucial role in providing financial services to the underserved and unbanked population.

“At Wallet Factory, we are revolutionizing the FinTech industry with a mission to build a “Cash Lite” society. We offer a comprehensive 3-in-1 digital wallet platform that goes beyond traditional banking systems. Our platform empowers banks and non-banking financial institutions (NBFIs) to serve the unbanked and underbanked populations in emerging markets across Africa, MENA, and LatAm.”

Mikhail Miro, CEO and Co-Founder of Wallet Factory

E-kyash: A success story of digital wallet implementation to serve the unbanked in developing countries

The success story of Belize Bank’s launch of E-kyash, the country’s first digital wallet, is a testament to the transformative power of financial inclusion and technological innovation. By addressing the needs of the unbanked population and leveraging the potential of digital payments, E-kyash has not only revolutionized the financial landscape of Belize but has also contributed to the country’s sustainable development. The introduction of E-kyash has helped Belize Bank to tap into the unbanked market and reach an estimated 40,000 young people aged 14 to 18 who lacked bank accounts. The digital wallet’s availability for personal users and businesses has propelled Belize towards fulfilling its national financial inclusion strategy, fostering economic growth, and reducing poverty. 

Digital wallet integration: Adding value to banking business

E-kyash has added much value to businesses and customers in Belize. Here are some of the milestones that showcase the value the digital wallet solution has added to the client itself, its B2B and B2C customers, and the financial inclusion improvement of the country:

Due to the seamless integration of the E-kyash digital wallet delivered by Wallet Factory, the Belize Bank Ltd has enjoyed a number of competitive advantages, namely:

1. Identified the large unbanked population in Belize as an opportunity to drive financial inclusion. 

2. Launched E-kyash, the first fully approved digital wallet in Belize, after vetting by the Central Bank.

3. Acquired 30% of the previously unbanked population, providing them access to financial services.

4. Simplified the onboarding process so customers could sign up without physical documentation. 

5. Offered a wide range of functionalities on one platform like P2P transfers, bill payments, merchant payments, and more.

6. Provided multiple top-up channels through agents, linked bank accounts, and other financial institutions. 

7. Empowered agents and merchants by paying commissions and providing tools like QR payments.

8. Prioritized security through PINs, biometrics, and other authentication measures.

After all, the success story of E-kyash in Belize is a clear example of the business benefits of integrating digital wallets in emerging markets to win vast previously unbanked audiences. The introduction of E-kyash has helped Belize Bank to tap into the unbanked market and reach an estimated 40,000 young people aged 14 to 18 who lacked bank accounts.

The digital wallet’s availability for personal users and businesses has propelled Belize towards fulfilling its national financial inclusion strategy, fostering economic growth, and reducing poverty. E-kyash has added much value to businesses and customers in Belize, and its extensive functionality, simplified onboarding process, and enhanced security measures have made it a popular choice among the previously unbanked population.

👉 To learn how to win previously untapped customers with digital wallets, please read the full case study at: https://walletfactory.com/case-studies/e-kyash-belize-bank-limited

AI: FinTech perspectives in Latin America

The Latin American AI sector expects growth and aims to confront bias. Latin American fintechs are adopting AI technology for speed and security. National strategies indicate a push for AI. Ethical AI and data privacy are top priorities for Latin American regulation. AI bias and lack of resources threaten AI development in the region. 

AI is assuming an increasingly important role in traditional banking as it provides technologies such as voice recognition, natural language processing, and computer vision for user-account management and fraud detection, machine learning methods, and deep learning networks for anti-money-laundering and credit modeling. Financial institutions and fintech firms must review how they can use AI to provide good, reliable customer service, and if consumers trust the products. 

Blockchain opportunities in LatAm

Wariness of Latin American governments lays fertile ground for crypto. Latin American financial services and fintech are embracing blockchain optimization. Why Latin America will be a hub for blockchain investment. 

Blockchain technology has the potential to revolutionize the financial industry in Latin America. The region has a large unbanked population, and blockchain technology can help to provide financial services to these individuals. Blockchain technology can also help to reduce the cost of financial transactions and increase the speed of transactions. 

Final thought

The future of fintech in Latin America is promising, with enormous potential for growth and innovation. The region’s fragmented market presents challenges, but also opportunities for fintech companies to leverage this opportunity and offer a solution to the substantial, yet online, population. The adoption of technologies such as AI, digital wallets, cloud-based WaaS solutions, and Big Data will help the region become one of the world’s leaders in FinTech and grow across the digital banking, digital payments, personal finance, lending, and investment sectors.

WF Team WF Team
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