As of 2021, 65% of Latin Americans have made or received digital payments. This isn’t surprising, considering mobile penetration in the region is higher than in both the U.S. and Europe. But, what is surprising is that, in spite of this, 70% of Latin America’s population remains unbanked.
Why is this the case?
You probably know that most consumers place great value on word-of-mouth recommendations when making purchase decisions.
To understand the influence of word of mouth in the Fintech sector in Latin America, consider Nubank, Brazil’s largest neobank. According to co-founder and CEO David Velez, the company has grown from 12 million customers in 2019 to 34 million solely thanks to the loyal customer base who sing praises about Nubank’s great customer service.
However, a better customer experience is not enough to improve financial inclusion in Latin America. The change needs to come at an institutional level.
Financial crime in Latin America grew due to a lack of effective laws and regulations. This has changed in the last decade as Latin American countries and organizations come together to establish comprehensive “Know Your Customer” (KYC) protocols and stringent Anti-Money Laundering (AML) regulations. These changes help reduce financial crime in the region, gain the public’s trust, and improve cooperation and transparency between financial institutions.
Now, how do companies like MetaMap fit into the picture?
The new regulations state that companies have the responsibility to develop effective KYC and AML screening processes. Therefore, access to reliable tools for KYC compliance, AML Watchlist monitoring, and financial risk management is the need of the hour.
It is not always easy to establish these processes and find the right partner. The process can be complex and lengthy. So why should Fintech companies look to invest in Latin America? How is the landscape of FinTech growth in this region?
FinTech in Latin America
The Fintech industry in Latin America has seen significant growth in the last few years. Between 2018 and 2021, the FinTech industry in Latin America and the Caribbean (LAC) doubled in size. We can contribute this growth to the following reasons.
Demand for financial services by an under-served population
Small-to-medium enterprises (SMEs) account for only 22 percent of the long-term financing in the LAC region compared to 34 percent for larger companies. This disparity in long-term financing is due to the high collateral requirements traditional financial institutions place on SMEs. They must do this because SMEs in the region don’t have the information lenders need to adequately assess customer risk and profitability.
In this way, Fintechs have made access to financing for SMEs easier. Fintech solutions use new processes and technologies to verify customer identity and assess customer risk, making it easier for small businesses and individuals to access credit.
Increased investment in the FinTech sector
2021 saw the region's start-ups raise a record $19.5 billion in funding. The Fintech sector received $6.1 billion (39%) of the total investment thanks to changes in public policies in several Latin American countries that:
- Introduced open banking in the region, paving the way for third-party financial services
- Made access to customer data easier and cheaper
- Enhanced transparency and security for investors
This was all done in the hopes of improving financial inclusion in the Latin American digital ecosystem. However, it was an unprecedented hero that really paved the way for digital financial inclusion.
Impact of the COVID-19 pandemic
Although cash remained the preferred mode of payment during the pandemic, being unable to leave their homes forced consumers to adopt e-commerce and digital payment methods.
This came as a boon to the nascent Fintech industry in Latin America, which used the opportunity to transform the state of digital finance and empower the unbanked population with access to credit and other financial services.
However, digital adoption brings with it some challenges. Activities like fraud and money laundering may increase as new financial practices and policies come into effect. This brings us back to the discussion of a lack of trust consumers have in Fintech, which directly affects user adoption and acceptance.
How can MetaMap help Latin America reach its potential?
Your company needs tools and solutions to verify and onboard clients, ensure you meet compliance needs, and provide a partner to help you build these necessary workflows.
At MetaMap, we have designed the most powerful solutions to solve some of these pressing issues for your B2C Fintech by:
- Verifying customer documents to authenticate ownership
- Creating risk profiles to evaluate the customer’s payment eligibility and financial risks
- Ensuring KYC/AML compliance to reduce the risk of fraud to both company and customer
In the long run, MetaMap wants to contribute to the democratization of economic opportunities – from improving onboarding processes to helping identify people with little to no access to credits and reducing online fraud. Moreover, using our solutions reduces human error and speeds up processes, providing a better customer experience.
By mapping reputation through merits using work, financial, legal, and social information, MetaMap can work with your company to shape the future of digital trust and create a more financially inclusive world.
The future of Fintech in Latin America
The landscape is changing for all. The business customer base in the Latin American region is growing, and they are looking for a modern banking experience. However, investments and ideas can't power this change alone. What you need is a service you can trust.
As the government does its part by setting guidelines, it's your organization’s job to partner with the right crew and create the infrastructure to implement these guidelines. This is where MetaMap can help.
Our proprietary systems offer powerful solutions to verify and onboard new customers, eliminating manual and repetitive identity verification tasks for you, so you can focus on growth and revenue.
Get started for free and discover how MetaMap can help put your organization on the map.