How the Fintech Sector Has Evolved in Latin America and the Caribbean

The fintech ecosystem in Latin America and the Caribbean has experienced significant growth since 2017. Over this period, the number of fintech companies in the region surged by more than 340%, increasing from 703 to 3,069 companies and expanding from 18 to 26 countries. This growth was highlighted in a study conducted by Finnovista, BID, and BID Invest

The year-over-year analysis of this period reveals a trend toward consolidation. During 2017-2021, the sector grew by 253%, reaching 336% in 2023. This growth highlights the sector's resilience, with the average annual growth rate dropping from 34% between 2017 and 2021 to 28% in 2023, reflecting a more solid and future-ready market.

Key Factors Driving Fintech Growth

The growth of the fintech sector in the region has been driven by several key factors. High consumer demand for financial services, combined with advanced digital infrastructure and a specialized workforce, has been crucial in the expansion of the ecosystem. According to a report by the World Economic Forum and the Cambridge Centre for Alternative Finance, these elements have been vital to the evolution of the fintech sector in Latin America and the Caribbean.

Additionally, access to financial services has significantly improved thanks to fintech companies, diversifying the options available to consumers. In 2023, the Payments and Remittances segment led the market with a 21% share, followed by Lending at 19%, and Enterprise Financial Management at 13%. Other segments, such as Technology for Financial Institutions and Wealth Management, have also shown notable growth, highlighting the sector's diversification and specialization.

Key Segments in the Fintech Sector

Payments and Remittances

The Payments and Remittances segment has been one of the driving forces behind fintech growth in the region. This segment includes solutions that facilitate money transfers both locally and internationally, including mobile wallets, cross-border payments, and mobile points of sale (mPOS). Despite a slight decline in its market share from 25% in 2017 to 21% in 2023, the number of companies in this segment grew by 257%. This growth underscores the importance of secure and accessible payment solutions and the increasing integration of digital payments into everyday life.

Lending

The Lending segment has played a crucial role in financial inclusion in the region, facilitating access to credit for both consumers and businesses. In 2017, it accounted for 16% of the fintech ecosystem but reached a peak of 21% in 2021, likely driven by the increased demand during the COVID-19 pandemic. In 2023, its share adjusted to 19%, reflecting stabilization in this space. The segment includes subsegments such as consumer and business loans, electronic factoring, and the rapidly growing "Buy Now, Pay Later" (BNPL) model.

Enterprise Financial Management

This segment is essential for the digital transformation of businesses in the region. It offers tools such as electronic invoicing, digital accounting, and solutions for financial management and business intelligence. Although its market share has fluctuated, moving from 13% in 2017 to 16% and then back to 13% in 2023, the 344% growth in the number of companies reflects the increasing need for efficient financial management tools in an increasingly complex business environment.

Technology for Financial Institutions

The Technology for Financial Institutions segment includes advanced technological solutions designed to optimize the financial processes of fintech companies and traditional institutions. This segment includes subsegments such as online customer identification (eKYC), risk engines, and regulatory compliance technologies (Regtech). These tools are essential for modernizing the financial sector, helping institutions comply with regulations and improve operational efficiency.

The fintech sector in Latin America and the Caribbean has shown impressive growth and evolution in recent years. As the ecosystem matures, the region is expected to remain fertile ground for financial innovation, driven by steady demand, robust digital infrastructure, and a highly skilled workforce.

The various segments within the fintech sector are playing a crucial role in improving access to financial services and in the digital transformation of the region, paving the way for a more inclusive and efficient financial future.

To read the full study, click here.