BLOG

FINANCIAL TECHNOLOGIES

Latin America: A fertile area for Mobile Financial Services

20 August 2022

For years, the industry of mobile financial services in Latin America has been playing catch-up with the rest of the world. While low rates of financial inclusion coupled with a rapidly increasing penetration of mobile technology have presented a fertile ground for the growth of the industry, fintech hasn’t proven an easy business. Latin America remained the underserved opportunity for mobile financial services.

Signs during the last few years show that the region is taking off. Three key pillars contributed to this change:

– Regulatory pushes in the right direction. Many countries in Latin America have introduced or are in the process of introducing new regulations that level the playing field between traditional financial institutions and new fintech players.

– A huge amount of services and increased funding. Mexico, Brazil, Argentina, Chile, Colombia are establishing themselves as preferred environments for fintech growth, while Peru is also an emerging hotspot, demonstrating the highest growth rate in fintech adoption. At the same time, fintech investors, especially from Asia, are moving into the region to take up unclaimed market territory.

– Adoption of smartphones. Latin America’s smartphone adoption rate is around 65{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} and is one of the highest globally (3rd place after North America and Europe). The total number of smartphone users has exceeded 250 million. On the other hand, a large proportion of Latin America’s population is unbanked or underbanked.

The future seems brighter. A recent report from Juniper Research holds a very positive evaluation for Latin America’s potential. The new research forecasts that the total number of users accessing mobile financial services in Latin America will grow 20{2b3fe3109f87c6f1c896babd3a2485fbf135a42141067a7771ef7eb1664b998e} on average annually over the next five years. This is predicted to grow twice as fast as saturated markets such as Africa & Middle East. In response, the report urges MFS vendors to leverage existing experience to launch services in this underserved market. Such services could include Mobile Money Transfer, Microloans, Microsavings and Microinsurance.

Many believe that there has never been a better time for Latin America’s financial sector as the region is well-positioned to become a global leader in mobile financial services. There are numerous opportunities to attract new underserved customers and bring them into the system via mobile-first services. For sure there are some significant challenges when it comes to achieving this goal, however, an increasingly friendly regulatory environment, increased investments, and mobile-first successes (in the region and around the world) are enough to prove that financial inclusion can be a reality in Latin America.