Wednesday , August 10 2022

Why the next wave of Fintech in Latin America will focus on B2B | Insider by Crowdfund


B2B: 3 Fintech opportunities in Latin America

The Fintech industry in Latin America thrives, with more than 1,166 Fintech start-ups creating a more inclusive financial system and stimulating economic growth in the region. According to the recent Fintech report in Latin America 2018: Growth and Consolidation by Inter-American Development Bank and Finnovista, the number of start-ups in the region has increased by 66% from 2017 to 2018.

The #Fintech Industry in Latin America thrives, with more than 1,166 Fintech start-ups creating a more inclusive financial system and boosting economic growth in the region

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There are a number of factors that stimulate the growth of Latin America in Fintech. On the one hand, the region is one of the fastest growing mobile applications in the world. With the increase in the number of smart devices, there is an increase in the use of mobile internet, which has led to the search for more mobile financial services. It is estimated that 70% of Latin American consumers are not banking or banking because they are excluded from traditional financial services as they can not provide appropriate documents or information to open an account or obtain credit.

But not only consumers are facing these challenges in Latin America. Small and medium-sized enterprises in the region (SMEs) are also known to have insufficient support in terms of financial services. SMEs represent approximately 90% of all Latin American and Caribbean enterprises and are the leading creators of new jobs in the region. The widespread use of the Internet makes it easier for more people to start their own business; however, traditional financial institutions are not sticking to the search for digital solutions that meet the needs of today's SMEs. As a result, many Fintechs in Latin America now fill this gap by providing lending, lending and financial management solutions that help SMEs in the region save time and reduce costs.

While Fintech's focused companies still attract lion's share of investment, Fintech's next wave of innovations in Latin America will focus on SME solutions.

Demand for alternative lending opportunities

SMEs create approximately nine out of every ten new jobs in emerging markets. However, these businesses face a number of obstacles when it comes to providing capital for growth and maintaining their operations. The global funding gap for SMEs is expected to be about $ 5.2 trillion.

In emerging markets around the world, it is difficult for SMEs to provide credit from a traditional financial institution or bank. Depending on the size and formality of the business, the company may not be able to produce the necessary credit ratings or assets to qualify for credit. When a bank can not verify the creditworthiness of a business, they often identify it as too risky for its investors.

Fintechs are rising to the borrowing space to solve this problem in Latin America. According to the report by the American Development Bank (IADB) and Finnovista 2018, lending decisions represent 60% of Fintech's overall business models in the region, whether balancing or peer-to-peer solutions, pp. Crowdfunding (30% of total) or factoring solutions (10%). While consumers are still the main target market for these credit decisions (68% are currently focusing on consumers and 32% on businesses), it is clear that there are still many opportunities to take. Fintech's start-up companies use advanced analytics and machine training to analyze a wide range of data and other factors to determine the creditworthiness of the business.

In Latin America, #Fintech start-ups use advanced analytics and machine training to analyze a wide range of data and other factors to determine the creditworthiness of business.

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Need for solutions for cross-border payments

Traditionally, the only way to do cross-border transactions is through banks. However, lack of transparency regarding currency conversion costs and transaction fees are just some of the many challenges faced by SMEs when using these traditional services. Today there are numerous solutions for making cross-border payments within seconds. Fintechs helps businesses to provide the best exchange rates and eliminate countless barriers to transactions, tracking and settling cross-border payments in real time.

MercadoLibre, for example, is an online market based in Latin America with more than 166 million active e-commerce users. The company is leading the revolution in digital payments in Latin America with an emphasis on innovative financial services that not only help millions of sellers to get credit but also helps them deal painlessly with cross-border payments. PayPal recently invested $ 750 million in the company, confirming the enormous digital payment solutions that help businesses in Latin America buy and sell across borders.

Mandatory electronic invoicing

Latin America has long been a world leader in e-invoicing, accounting for 15 billion of the world's 36 billion electronic invoices created in 2017. E-invoicing has many advantages for governments and business. On the one hand, governments can better track and tax transactions when all invoices are submitted electronically. Meanwhile, businesses can deal with the tax process more efficiently when all their invoices report and organize in one place.

Several Latin American countries have already made e-invoicing mandatory, which creates many opportunities for Fintechs to build products or services based on the availability of this data. More analytics data means less risk for borrowing and lower interest rates for businesses they serve.

The next wave of Fintech in Latin America

Facing the traditional financial institutions in Latin America is not without its challenges. Tackling frequent political and economic instability, slow regulatory systems and sophisticated markets in each country is an important endeavor for every Fintech targeting its SME decisions in the region. However, the current lack of proposed solutions is a great opportunity for those who handle the task. SMEs are the backbone of the Latin American economy and are increasingly looking for digital solutions to help them operate and optimize their business.

Why the next # Fintech Wave in Latin America will focus on B2B

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Andres Abukomor is a co-founder and Chief Operating Officer of OmniBnk, an outsider who provides financial services to SMEs in Latin America.

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