Anton Alikov, CEO and Founder, Arctic Ventures.
The financial technology industry in Latin America is undergoing rapid transformation. Thanks to a combination of diverse factors, the fintech ecosystem is promoting financial inclusion and changing the ways millions of people in the region access financial services.
My company, a venture fund, specializes in fintech, among other sectors, and we recently participated in a funding round for a neobank in Mexico. I’d like to share our experience in the region, the trends we’re paying attention to and what other investors exploring this space should know.
Understanding The Region
Latin America is one of the largest macroeconomic regions globally. It includes South America, Central America, the Caribbean islands and Mexico. According to the World Bank, the total population of the region exceeds 660 million people, and the combined GDP of Latin American countries was estimated at $7.3 trillion in 2024, with a GDP annual growth rate of 2.3%.
Almost three-fourths—70%—of the Latin American population can still be considered either “unbanked” or “underbanked,” the World Economic Forum reported. Access to credit and savings is limited as well, with less than 30% of adults borrowing from or saving in a formal financial institution.
How The Financial Landscape Is Evolving
Latin America has long been characterized by economic instability and social inequality; however, today it is becoming the stage for a financial revolution. The region provides fertile ground for solutions that challenge inefficient practices and promise a more progressive economic future.
A report by the Inter-American Development Bank found the number of fintech startups grew by more than 340% between 2017 and 2023—from 703 companies in 18 countries to 3,069 companies in 26 countries. Brazil, Mexico and Colombia account for 57% of this market. For comparison, the U.S. currently has more than 10,000 fintech firms, according to Statista.
But what financial products are currently available in the region? Fintech companies in Latin America now cover a wide range of market segments, including:
• Digital payments: Debit and credit cards, along with mobile payments, are gradually displacing cash in Latin America, according to McKinsey. Digital wallets, such as Mercado Pago and PicPay, are also gaining traction. Wallets can facilitate peer-to-peer transfers and online payments.
• Credit platforms: Some companies, such as Creditas and Konfio, use alternative credit scoring methods and aim to provide loans to individuals and small businesses previously lacking access to financing.
• Neobanks: Digital banks without physical branches are expected to continue growing significantly in the region in the coming years. These banks often have lower fees, instant onboarding and user-friendly mobile applications.
• Insurtech: Technology is also being used to create more accessible and mass-market insurance products for underserved populations in Latin America. A couple of examples include Minuto Seguros and Justos.
• Investment platforms and wealthtech: Platforms offering access to investments are becoming popular among younger generations and tech-savvy users.
• Embedded finance: Financial services integrated directly into nonfinancial platforms can enable users to obtain credit or insurance on e-commerce sites or superapps. Embedded finance revenues are projected to reach $34.5 billion by 2029 in Latin America.
• Cryptoassets: In countries with unstable currencies, cryptocurrencies are becoming a popular tool for savings and transfers.
Drivers Of Change
The growth of fintech technologies in the region is no coincidence. It is a direct technological response to deeply rooted economic and social problems in the region:
Financial exclusion: As noted above, a significant portion of the population still lacks access to banking services. In my experience, traditional banks tend to serve wealthy clients and may have high fees, complex procedures and a limited branch network, especially in rural areas. Fintech companies can help fill this gap.
Growth of mobile internet: The widespread penetration of smartphones and increased connectivity have created an excellent platform for the dissemination of digital finance, allowing fintechs to directly engage clients while bypassing traditional infrastructure constraints.
Distrust of traditional institutions: Economic crises, hyperinflation and corruption have undermined public trust in classical financial and governmental institutions. This can make modern, transparent, user-oriented fintech solutions an attractive digital alternative.
Costliness and complexity of services: Money transfers, loans and payments have often been slow and expensive. Technologies can accelerate, reduce costs and simplify these processes.
Future Opportunities
I believe opportunities for further fintech growth lie in supply chain financing and regional integration in trade finance. Despite interest from major players, these market segments remain underdeveloped. In my view, embedded fintech solutions tailored to specific industry verticals and trade agreements hold significant growth potential and could foster regional economic integration.
Fintech companies that act on these opportunities can become important drivers of financial inclusion in the region, expanding population access to banking and investment services, encouraging entrepreneurship and strengthening the economy. They can also create jobs, foster innovation and intensify competition, compelling traditional financial institutions to improve their operations.
Challenges To Consider
However, despite rapid growth, challenges remain: uneven and imperfect regulatory frameworks, cybersecurity, the digital divide, infrastructure gaps, macroeconomic instability, currency fluctuations and inflation. Despite the growing fintech space, cash is still used for many transactions, per the aforementioned McKinsey report. Therefore, fintechs have to develop hybrid solutions combining digital and physical contexts.
Nevertheless, these obstacles are not insurmountable. The fintech industry in Latin America can prepare for further expansion through cross-border cooperation, the adoption of new technologies (e.g., blockchain and AI) and a focus on inclusive finance. I anticipate the industry will experience many more years of growth ahead.
My advice to investors looking for attractive fintech projects in the region is to ensure you understand local features and challenges. Then, look for companies that identify and try to solve an acute local problem, not just copy-paste a successful Western business model.
I believe the fintech revolution in Latin America is not only transforming the region’s financial landscape but also facilitating broader social and economic changes, strengthening the integration of the region into the digital economy. It represents a powerful force far beyond a local business trend, as it’s generating new business and social opportunities.
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