Latin American fintech firms are increasing their investment in the regional market to expand their reach among the unbanked population

Latin American fintech firms are increasing their investment in the regional market to expand their reach among the unbanked population

Latin American fintech firms are increasing their investment in the regional market to expand their reach among the unbanked population

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In the past, Latin America was seen as a difficult growth market by fintech firms. With an unfavorable regulatory landscape and the fact that the majority of the market was controlled by traditional banking institutions, new entrants found it difficult to break through successfully in the region. More recently, countries like Brazil and Mexico have announced fintech-friendly regulations to drive innovation in the sector and boost financial inclusion among its citizens. The new regulations meant that the Latin American fintech market turned into a lucrative growth opportunity for global venture capital and private equity players.

Over the last three to four years, a lot of money has been invested into the Latin American payments markets and the trend is projected to further continue over the next 12 months. Nubank, for instance, secured a loan of up to US$150 million as part of its strategy to expand operations in Colombia.

  • The Brazilian digital bank secured the loan from the International Finance Corp. as it seeks to further strengthen its position in key Latin American markets. In Colombia, the firm issued more than 400,000 cards in the last 10 months, leading to January 2023. The capital secured from the International Finance Corp. will allow Nu Colombia to further expand its reach among the unbanked population, thereby strengthening its position in the Latin American market.

In its three operating countries, namely Brazil, Mexico, and Colombia, Nubank amassed 70 million users at the end of Q3 2022. In Mexico, the firm also started offering savings accounts and debit cards to consumers in November 2022. The launch of the savings account and debit card offerings is part of its strategy to gain a strong foothold in the Mexican market, as more than half of the consumers do not have such accounts. Known as Nu Mexico, the firm has made the account completely digital, which will allow Nubank to drive financial inclusion among consumers living in rural areas of Mexico.         

With both Mexico and Colombia markets showing high growth potential over the next five years, regional players such as Argentina-based Uala have also announced to increase their investment in these markets.

  • In October 2022, Uala announced that the firm will invest US$150 million over the next 18 months to support the growth of its digital banking business. The investment, largely for Mexico and Colombia, comes at a time when the firm is looking to expand its user base 5x over the next five years. In 2022, Uala already invested US$80 million to boost its operation in Colombia.

In addition to its prepaid payment offerings, Uala is also expanding its presence in the personal loan and cryptocurrency trading segment. In Mexico, for instance, Uala entered into a strategic collaboration with ABC Capital in December 2022. Through strategic collaboration, Uala is targeting unbanked and middle-class users in Mexico. In November 2022, Uala also enabled Bitcoin and Ether trading for its customers in Argentina. Nubank also launched a crypto exchange in Brazil in July 2022.

The growing investment, from Nubank and Uala, in these two Latin American markets is projected to further drive financial inclusion in the region, thereby supporting the growth of the overall prepaid card market. Apart from these fintech firms, Stori and Mercado Pago are also seeking to tap into the large unbanked population in Latin America.

  • In January 2023, Mercado Pago announced a 75% discount promotional offer to drive the adoption of point-of-sale machines among merchants in Latin America. This promotional offer is part of its strategy to drive the adoption of digital payments for in-store transactions among merchants, which will subsequently support the growth of the prepaid card industry.

The growing competitive landscape and the investment from these leading fintech firms in the region are projected to drive further innovation in the prepaid card market over the next three to four years in Latin America. As the market continues to grow and players expand into other Latin American markets, PayNXT360 also expects these fintech firms to raise more funding rounds from global venture capital and private equity firms from the short to medium-term perspective.

To know more and gain a deeper understanding of the prepaid card market in Latin America, click here.

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