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Bank-fintech partnerships key to success in Latin America

Radar Payments - in collaboration with Fincog - recently published a report on the state of digital banking in Latin America. In this blog we look at the development of the financial technology industry in the region and the opportunities presented by its demographics with a particular focus on payments.

Despite growing innovation in the payments space over recent years, the fintech sector in Latin America is less mature than in other regions. However, regulatory developments have fuelled rapid growth by formalising the frameworks under which financial technology companies operate.

As a result, fintechs across the region are developing open banking solutions that leverage application programming interfaces (APIs), fuelled by venture capital investment.

Mexico has been in the vanguard of open banking in Latin America. The Central Bank of Mexico published the first regulatory framework for standardised API infrastructure for the country’s banking sector last year as part of the draft-decree Law to Regulate Financial Technology Institutions published in 2018.

The country’s largest banks pre-empted the regulation somewhat by offering APIs to third parties.

One of the Mexican government’s major priorities for its financial technology strategy is to encourage digital payments to reduce the use of cash, a key weapon in its fight against corruption and tax evasion.

Increasing awareness of and access to financial services

The first licence was issued in January 2020 and there are now more than a dozen financial technology companies authorised in Mexico by the National Banking and Securities Commission offering services from crowdfunding to digital wallet services.

Under Brazil’s open banking project, large and medium-sized Brazilian banks with international operations are obliged to provide APIs to enable third party developers to build applications with consumer data which has been shared with their consent.

Fintechs in Brazil have been quick to recognise the opportunities created by open banking in areas such as foreign exchange transactions as well as payments. The country has encouraged payment innovation at regulatory level through initiatives such as PIX, a payment method developed by the Central Bank of Brazil that enables transactions to occur almost instantly at any time of the day.

This system ensures that all wallets that use QR codes are interoperable, supporting transfers and payments from one e-wallet to another in real time.

Elsewhere in the region, a draft bill for the Fintech Law was published by Chile’s Financial Market Commission earlier this year. A recent study by the Ministry of Finance and the Inter-American Development Bank shows that payments and transfers is the largest single segment of the fintech industry in Chile.

Colombia has adopted a new regime for low value payments systems, while the Argentine Central Bank and the Financial Information Unit have introduced supports for open banking by allowing banks to share client information at their request during the digital on-boarding processes.

These developments indicate the potential for financial technology companies to compete with incumbent operators in the provision of payment services.

Neobanks boom across the region

According to data from Crunchbase, more than $7 billion has been invested into Latin American financial services companies over the last five years and the expectation is that investment will increase this year.

The largest recipient of that cash is Brazilian fintech Nubank - the largest neobank in the world with approximately 33 million customers and an estimated value of $30 billion.

The region’s demographics underline the potential for digital payment services. Latin America is home to more than 650 million people across 33 countries with more than half of this population living in Brazil and Mexico.

Cash is still the dominant form of payment in the region’s largest economies. More than 90% of payments in Mexico are made using cash, while the figure for Brazil is in excess of two-thirds. There has been a surge in use of e-commerce over the last 12-18 months, but growth is limited by the high number of people who don’t have access to financial products.

Demographic promises digital dividend

Latin America has a sizeable youth population that have grown up in the smartphone era and are comfortable accessing financial services online, as can be seen from increased e-commerce volumes. The way financial services are accessed is evolving to meet the demands of these consumers.

This is a crucial development in a region where there is much more to do to improve financial inclusion. Americas Market Intelligence estimates that the region’s banked population grew by 24% in 2020, but this is from a low base. The most recent World Bank Financial Inclusion Index (published in 2017) reported that bank account penetration across Latin America stood at just 55%.

The more financial data sources available on a platform the better for companies building innovative payment services or applications. Open finance APIs enable companies to access unique financial data from gig economy platforms, for example, to offer more inclusive financial services.

Minu (a start up offering financial services for gig workers in Mexico) uses our platform to connect its app with financial data from one of the largest delivery companies in Latin America.


To succeed in Latin America, banks need to partner with technology providers that can offer banking and payment-as-a-service capabilities to reach customers at the point of purchase or order, wherever they are.

For more information, download our guide to digital banking in LatAm.