Latin America sees booming digital banking sector with Brazil leading


In recent years, digital banking in Latin America (Latam) has experienced extraordinary growth due to changing customer needs, expanding technological penetration and rapidly changing regulatory standards.

Since 2017, the number of digital banks has more than doubled to reach 52 independent neobanks in 2021, according to to a new report from Swiss digital banking technology provider Banking, Payments: Context (BPC) and Dutch fintech consultancy Fincog.

Brazil leads the region both in terms of industry development and consumer adoption. Of the 52 neobanks identified, 24 players are from Brazil, and out of a pool of 77 million neobank clients in 2021, 63.5 million are located in Brazil, or 82.5% of total neobank clients in the region, according to study.

Digital Banking Growth in South America 2012-2021, Source- Digital Banking in Latin America, BPC and Fincog, June 2021

Growth of digital banks in South America 2012-2021, Source: Digital banking in Latin America, BPC and Fincog, June 2021

Accelerated growth

Looking at the main growth indicators, interest in neobanks in Latam increased significantly in 2019, where the number of clients jumped 307.8%, from just 9 million in 2018 to 36, 7 million. From 2019 to 2021, that number doubled to reach 77 million in 2021.

After Brazil, Mexico ranks second, hosting 14 independent neobanks that serve 7.1 million customers. Mexico is followed by Chile (2.5 million neobanks), Argentina (2.4 million) and Colombia (1.5 million).

Number of Neobank customers 2012-2021, Source: Digital Bank in Latin America, BPC and Fincog, June 2021

Number of Neobank customers 2012-2021, Source: Digital Bank in Latin America, BPC and Fincog, June 2021

Latam’s digital banking industry is dominated by a handful of players. The study found that the top ten digital banks account for over 90% of all of Latam’s neobanking customers, for a total of 71.2 million. Large players in more developed markets such as Brazil and Mexico are now expanding into smaller countries and thus rapidly expanding their market shares.

The main neobanks of Latam

Among the key players, Nubank stands out from the crowd. The company benefited from a pioneer advantage in the underserved space, launching in 2014 a no-fee credit card, fully managed by a mobile application.

Today, Nubank serves some 34 million customers, making it the largest digital bank in Latam. It is also the most valued private company in the region with $ 30 billion, according to CB Insights data.

Nubank is reportedly in the process of preparing for its U.S. stock exchange debut, which could value the digital bank at over $ 40 billion and could take place by the end of the year or early 2022, according to sources. Told Reuters in June 2021.

In addition to Nubank, several new players have also succeeded in conquering significant market shares. For example, Neon, also from Brazil, targets low-income segments and micro-entrepreneurs and has accumulated some 9.4 million clients.

Broxel in Mexico, with approximately six million customers, is a digital payment solutions company that provides a free prepaid debit card to the Hispanic population in the United States to facilitate remittances and send or receive money. instantly across borders.

In Argentina, market leader Uala has 2 million customers, providing them with almost free financial services, including a bank account, associated debit card, mutual fund investments, personal loans, and management features. money.

Top 10 neobanks by number of clients 2021, Source - Digital Bank in Latin America, BPC and Fincog, June 2021

Top 10 neobanks by number of clients 2021, Source: Digital Bank in Latin America, BPC and Fincog, June 2021

The report also mentions smaller but notable Latamian neobanks like Colombian RappiPay, the region’s first and only super-app that started as an e-wallet service, Albo, a Mexican startup focused on introducing low income. and means. segments in the formal financial system, Maximo, from Peru, which targets younger generations with a free digital account and support services, and Cuenca, from Mexico, which provides basic daily banking services to underserved segments.

A favorable regulatory landscape

The growth of the neobank in Latam can be partly attributed to favorable regulatory changes and modernization initiatives by governments themselves, the report notes.

Brazil, for example, launched its bank plan opened in February 2021, last year, the central bank launched a national instant payment system called Pix. Pix has since been supplemented with new features and capabilities such as Pix Cobrança, which allows businesses to generate a QR code for a transaction at a later date. Other features slated for release this year include offline transactions, cash withdrawals, and a “payroll account.”

In Mexico, the fintech law was launched in March 2018, providing a framework for major fintech groups, such as crowdfunding platforms and e-payment providers, while also providing a process for new fintech models.

As of early 2021, 93 FinTech companies were in the process of obtaining a so-called FinTech Institution (FTI) license, according to data from the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission). , showing how the legislation is helping to stimulate the growth of startups.

Mexico’s historic legislation prompted several other Latam countries to follow suit.

In Chile, the Financial Markets Commission (CMF) published in February 2021, a bill known as Fintech, a new regulation which aims to establish a legal framework for crowdfunding platforms, alternative transaction systems, financial instrument intermediaries, depositaries and credit counselors.

Colombia launched in 2020 the first fintech regulatory sandbox in Latin America, a two-year agreement that allows startups to experiment with business models without meeting all the requirements of a traditional financial institution.

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