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

Thursday, December 21, 2017

When he’s on the road, dashing in and out of airports for work around Latin America, Argentine Gabriel Paluch often opens up his laptop, peers down over his thick black mustache and skims the numbers on the screen. His screen shows him the value of money he’s loaned borrowers through Afluenta, a Buenos Aires–based financial platform. If his borrower doesn’t default, he’ll get around 20 percent back on the principal amount. Net. Annual. After inflation.

Inflation. That’s the key word for Paluch and a growing number of Latin Americans who are seeing their peso value get eaten up by what they perceive as irresponsible politicians and banks. And in response, Latin Americans — especially millennials — are turning to fintech platforms as an alternative to traditional banks, real estate or that space in between the mattress where you stash dollars. A frustrated 49 percent of the region’s population and many small- and medium-size businesses are outright excluded from traditional financial services, according to the Inter-American Development Bank (IADB). Others, who have access, don’t even bother using the system because of decades of broken promises.

IADB found that between 2014 and 2016 around 700 startups in the fintech space have popped up, with $186 million in venture capital in 2016. Afluenta offers peer-to-peer loans and investment. Crowdium, another fintech startup, focuses on real estate. And crypto-powered Wayni is uniting a bitcoin medium for exchanging loans with two old digital technologies: the ATM kiosk and the cellphone. But they all have similar goals: strip out traditional banks, aka the middleman, and get the people fair yields.

Photo courtesy of Highways England.