Growing Latin American Fintech Challenges Legacy Banks

Mexico's fintech ecosystem rapidly expands bringing international attention while a Visa-backed Brazil payments company raises $150 million

Recent headlines demonstrate the accelerated digital transformation of Latin America (LATAM) particularly in the fintech and e-commerce sectors in the wake of COVID. This includes international companies expanding in Mexico's fintech ecosystem, a Brazilian payments firm closing on a large private funding and a Series A for an e-commerce startup specializing in digitizing “corner store” small businesses retailers.

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Mexican Fintech Expansion Threatens Legacy Banks

With the pandemic accelerating the integration of many Mexicans into the digital world, Mexico’s fintech ecosystem is expanding and attracting international attention. 

Oyster, a challenger bank from the United States, and Mexico's Klar, which secured the country’s largest ever seed round, each raised $14 and $15 million in September and October, respectively. Moreover, Kavak, a used car platform became the country's first ever unicorn a major milestone which may draw additional international interest.

Thiago Paiva, a Mexico City-based product manager at Oyster Financial Inc., told S&P Global Market Intelligence:

"International investors have been looking at the Mexican market more closely since 2019 and they are starting to invest more due to perceived signs of maturity, with companies reaching more advanced stages of development and attracting more customers." 

Once fintechs raise even more funding they may pose a challenge to legacy banks. Already, Albo, a Mexican challenger bank takes a confrontational approach on its website with the slogan "#GoodbyeBanks - say goodbye to banks, lines, bureaucracy and ridiculous fees forever."

Visa-Backed Brazilian Payments Firm Raises $150 Million

Further indicating Latin America fintech growth, Brazilian payments firm Conductor raised $150 million in a private funding.  As more individuals enter the banking system in LATAM, Conductor intends to use the funds to expand in the region ahead of a possible stock market listing in the United States.

Conductor provides payments services and software to companies including fintech businesses and retailers. Its Chief Executive Officer, Antonio Soares, notes the lag in payments technology within Latin America versus Brazil. He explains to Reuters:

“The electronic payments industry in Latin America is some five to ten years behind Brazil and regulation in the region is pursuing more competition.”

Conductor is backed by payments processor Visa Inc. and investment firm Riverwood Capital. The company currently has 30 million active users and processes 1.5 billion transactions per year.  

Colombian E-Commerce Platform Raises $12 Million To Digitize "Corner Store" Small Businesses

Further showing LATAM’s digital transformation, Colombian e-commerce platform Chiper raised a $12 million Series A round bringing the startup’s total funding to $25 million. WIND Ventures, Monashees, and Kaszek Ventures participated in the round.

Chiper’s platform allows independent merchants to connect with  “corner store” small business retailers. In Latin America, people purchase 65% of their groceries at these small businesses, yet each store is run by an independent owner, with little to none technical integration. 

Chiper’s software provides features including inventory procurement, management, and fulfillment to make these businesses more efficient. Jose Jair Bonilla, Co-Founder and CEO stated: 

“We consolidate everything that an independent store needs into one platform, offering them great prices, next-day delivery, and a convenient service to find anything they need.” 

Chiper will use the fresh capital to expand its customer base from 3,000 to 30,000 by the end of 2021. It also plans to launch into four new cities in Mexico, with plans to expand into Brazil.

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