NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, December 4, 2015

Financial technology, or fintech, is having its moment. Just a few years ago, startups operating in the fintech space struggled to gain the same sort of notoriety or investment rounds as the hottest chat app or mobile games of the time. That’s been rapidly changing.

Just recently we’ve seen Japanese electronics and ecommerce giant Rakuten launch a $100 million investment fund for fintech startups globally. Despite this potentially global reach, different regions will throw up different challenges for fintech. North America and Europe seem ripe for the picking with mobile payments, commerce and the traditional banking sector getting involved.

The landscape for Latin America is very different though. World Bank figures from last year show that in Latin America, just about 51% of adults have a bank account but this is growing compared to a few years ago, all the while internet and smartphone penetration is growing with it.

This creates a heady mix of opportunity for fintech. People are warming up to banking services at the same time that smartphone penetration is swelling so it makes sense, at least on paper, that fintech startups should benefit but there are still plenty of challenges.

Lawrence McDaniel is head of investor relations at Startup Mexico and says that of the startups he’s seen there’s little in the way of fintech: “All of them are between PowerPoint stage and trying to win a first customer or find an early adopter.”

Mexico is in a nascent stage but there’s a wealth of burgeoning innovation centres and resources like incubators and accelerators for startups to use, he tells IDG Connect. “There are hundreds of innovation centres in Mexico today, up from zero a few years back,” he says.