Hi there! Daniela here, reporting from Mexico City. I’ll be sharing this newsletter on Latin American tech’s nooks and crannies every other month, starting today.
Having been Latin America’s biggest tech sector in terms of investment for the past decade, fintech paints a canvas large enough to depict the region’s differences more clearly. During the early days of the industry, Brazil and Mexico were attracting most of the investor money because their large populations — almost half of them unbanked or still dependent on cash — meant a Wild West of opportunities for all. As deals flowed for companies like Brazilian challenger bank Nubank, which debuted on Nasdaq in 2021, and Mexico City–based Clip, now a payments unicorn backed by SoftBank, fintech in Latin America was commonly reduced to what these huge countries needed and created.
But fintech’s breadth can be seen in smaller countries. Chile is a good starting point, as it has some of the broadest differences. The legacy of its past 50 years — 18 under a free-market dictatorship, 32 under democratic rule — can be seen in the development of the country’s financial technology. Private banks that coexist with state-backed ones jointly support an advanced digital financial system. Contactless payment terminals are available nationwide, and anyone with a national ID number can sign up for a simple savings account online, provided by the state-owned bank. Almost 75% of all Chilean adults have a bank account — the highest rate in Latin America, where the average is about 50%.
No wonder that Chile’s fintech startups are not pitching the same products as some of the most prominent fintech companies in other countries. While digital bank Nubank has been growing in Brazil and Mexico, promising to free people from the hassle of going to a physical bank branch, challenger banks are just starting to pop up in Chile. “Traditional banks have done a good job at going digital, so challenger banks don’t really have much to offer,” Camila Perry, who works at MercadoPago in Santiago, told me.
The country’s fintech companies are not aiming to bank the unbanked or to spread the gospel on digital payments either; 90% of all internet users in the country already have a bank account. In fact, MercadoPago, a payments solution that is part of the Argentine e-commerce giant MercadoLibre, entered the country until very recently, and is struggling to compete with other digital payment companies. It’s a problem MercadoPago doesn’t have in Mexico, for example, where the solution has been broadly adopted by small businesses.
Rather, Chilean fintech is growing in investment platforms. Clemente Yapur, head of positioning and brand marketing at the Chilean office of global nonprofit Endeavor, told me a few weeks ago that Fintual sparked the trend. The company was founded in 2014 and allows users to invest in mutual funds and ETFs for their retirement plans through an online platform. It’s grown quite popular in Chile, ballooning its number of users after the pandemic. Mexico, a market it entered recently, hasn’t grown as much. It’s a country where other investment platforms have tried and so far failed to considerably swell the minuscule group of individual stock market investors — barely a million in a country of 130 million people.
According to Yapur, Fintual’s growth spurt was almost simultaneous with a controversial political move in Chile: during the Covid-19 pandemic, the government cashed out the national pension fund several times. “People are now worried about their savings for retirement,” Yapur said. While Fintual keeps growing — it now has over 85,000 users — Chile might take off as one of the few countries in Latin America where investment platforms are actually popular. A rarity in a region where personal investing is still uncharted territory.