Latin America’s equivalent of April Fool’s Day falls on December 28, so Platzi — a Colombian edtech — decided to play a little prank on its followers.
“Announcing PlatziCard. Platzi’s first step to becoming a fintech specialized in education,” said a video ad from the startup’s social media accounts. “No fine print!” said the spokesman in the video as a swarm of tiny terms and conditions appeared at the base of the screen. To apply, a user needed only to write to firstname.lastname@example.org (Iwantmoney@platzi.com). Most unbelievably of all, PlatziCard offered a $5,000 credit line up front to anyone who asked for it — in a region where credit is offered only to the very richest.
“Everyone is launching a credit card,” Freddy Vega, Platzi’s co-founder and CEO, told me. That was the obvious joke: At its current stage of tech development, every startup wants to emulate the success of the fintech sector. Platzi, an edtech with no business in the credit sector, was playing on that trope. And yet, this unbelievable scenario was still believable enough that Vega said calls and emails “overwhelmed our customer support” demanding access to the card.
“People want free money,” Vega told me. Latin America is starved of cash, and the startup ecosystem is just an extension of that society. The problem is that Latin American fintechs often aren’t providing what they promise.
There are the interest rates over 50% for the actual credit cards offered by these fintechs; the lack of access given to people outside certain economic classes; and the condescension toward people who default on their debts, often ultimately chalked up to a lack of financial education, rather than the often Byzantine systems of repayment.
That’s not to say that many of these fintechs are not good, but that they needn’t be excellent, given the dismal state of the preexisting financial establishment. But Latin America is so bad at lending to its denizens that it skewed the market in weird ways. It made investors like SoftBank the early birds at the cap table and IPOs in Latin American stock exchanges a nonstarter.
In a regional context like this, it is natural for fintech to do well early on in a tech ecosystem; they’re often the startups that know what it’s like to be a startup, so they lend to other startups.
Vega’s prediction is that all these fintechs specializing in small businesses, individuals, startups, women, couples, pets, and so on will eventually consolidate into a few big companies. We can already see this happening. Here in Mexico, Sr. Pago was bought by Konfío. Meanwhile, in Brazil, Nubank recently acquired Olivia. The list goes on.
Now, as some of the founders cash out or go public, we are witnessing a new flurry of cash flooding the market and the chance for a second startup boom. So, what sectors should Latin American startup watchers keep an eye on as fintech consolidates regionally? For that, look for the next edition of this newsletter.