Over the past few years the Latin American fintech sector has been growing steadily, capturing the attention of the global market and even adapting well to the Covid-19 situation.
One person interested in this market is Mario Shiliashki, CEO Payments at PayU, a company that provides payment technology to online merchants. Mario is a payments veteran and has held positions at both Mastercard and Paypal prior to joining PayU, and is also an advisor to Metamorphic Ventures in NYC. In his early career, Mario was an equity analyst at Goldman Sachs and subsequently a strategy consultant at Bain. He holds an MBA from Harvard Business School and a Bachelor of Science degree in Finance and Economics from Bryant University.
Here Mario discusses the Latin American fintech sector and how governments have been relying on and investing in fintech to keep the economy ticking.
Alongside ‘coronavirus’, ‘pandemic’ and ‘vaccine’, ‘resilience’ is right up there with the most used words of 2020.
One sector which has shown not only resilience but real growth during the past year is fintech in Latin America. The crisis has sparked significant change in a region that was already demonstrating its agility, adaptability and appetite when it comes to financial services.
Despite ongoing social and political pressures, the market has boomed over the past decade. Since 2014, fintech funding in Latin America has grown from less than $50 million to top $2.1 billion in just six years. In total, fintech in Latin America is estimated to have a valuation of more than $150 billion. This eye-watering amount has truly captured the world’s attention and continues to dilute the spotlight from other markets, such as Asia.
There are a number of factors behind this incredible rise, which is transforming the region – regulation, government backing, skyrocketing internet and mobile penetration, and of course, huge adoption in e-commerce – both local and cross-border.
Strong government drives to increase foreign direct investment have proven effective, with businesses capitalising on tax and investment incentives in the region. Such incentives have not just targeted businesses, but also individual consumers. In Colombia, the government instigated VAT-free days as an initiative to kickstart spending and halt economic contractions. As a result, we at PayU recorded sales rise by at least seven times that of regular shopping days. This is a great example of how the government has collaborated with both fintech and e-commerce platforms to make sure they’re ingrained across Latin America.
In this dynamic and thriving market, fintech players are offering tangible benefits to both businesses and consumers alike, which is particularly beneficial in a time of crisis.
As an online payments provider, we’ve witnessed high levels of fintech adoption first-hand, with a strong migration towards e-commerce being one of the most clear-cut trends. Both domestic and international merchants are working quickly to implement e-commerce platforms built on the shift in consumer behaviours that are clearly here to stay.
In the first seven months of 2020 alone, we processed in excess of 120 million transactions for more than 25,000 merchants in Latin America. This represents over 70% growth over 2019 – a truly meteoric rise, which is showing few signs of slowing. Long periods of isolation at home translated into increases in online entertainment consumption, with payments for streaming platforms averaging monthly increases of 100% compared to the same period in 2019. Similarly, home and garden improvements rocketed over 130% between January and July, with people no longer being able to put off DIY projects. Keeping up with this demand requires the ability to scale and grow online seamlessly, which is where a global payments partner with local expertise is invaluable.
Although fintech in Latin America has remained resilient, the pandemic is not over, and nobody has a crystal ball. As borders begin to re-open, global e-commerce remains the best way for merchants to safeguard themselves for the long-term effects of Covid-19. Merchants wanting to capitalise on the surging demand for e-commerce must seek expertise from an informed partner; Latin America is an exciting albeit complex and diverse region. Payment technologies that make the shopping experience adaptable to different consumer needs, frictionless and safe are integral to success.
Ultimately, thanks to the welcoming regulatory landscape and skyrocketing internet penetration, there’s never been a better opportunity for both international and domestic merchants to maximise on Latin America’s e-commerce opportunity. I, for one, cannot wait to see this region continue to flourish, both in e-commerce and into a global fintech hub.