Attention FinTech entrepreneurs! 70% of the population in Latin America does not have a bank account, says study
A recent study found that in Latin America 70% of people do not have a bank account, while 8 out of 10 do not have a credit card, which represents a great opportunity for FinTechs.
It is not news that Latin America is a fertile field for companies that offer FinTech services. This is confirmed by a recent study, which found that 7 out of 10 residents in the region do not have a bank account , while 80% do not have a credit card .
The State of Global Financial Health Innovation report was prepared by Village Capital , the world's largest organization supporting early-stage startups, in collaboration with the MetLife Foundation , PayPal , and Moody’s .
For two years, the firm analyzed the financial health of individuals and small business owners in regions of the United States, Europe, Latin America, South Asia and the Middle East / North Africa.
“The big problem that we detected in these five regions, after evaluating 1,100 applications from 22 countries, is that there are financial services for some, but not for all. Especially there are none for populations such as women, refugees or migrants and rural communities, ” said Daniel Cossío, regional director of Village Capital Latin America in a statement.
Low banking in Latin America
The results showed that 70% of Latin Americans do not have a bank account and 8 out of 10 do not have a credit card . Another interesting piece of information is that more than half of the region's workforce works in the informal sector , that is, they do not have contracts, social security, or the financial stability to receive a loan from traditional banks.
Image: Courtesy Village Capital.
On the other hand, research indicates that small businesses face several obstacles to growth , such as access to financing and other tools.
“Most banks and financial institutions still consider SMEs as high risk to finance. For this reason, they set interest rates higher than those offered to their large competitors ” , the report adds, highlighting that more than 2.6 million SMEs have closed or are close to doing so as a result of the pandemic.
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An area of opportunity for FinTechs
The study included some trends and quantitative data from the FinTech sector, pointing out that these financial technologies can solve the big problems of the unbanked population.
FinTech companies would have the potential to democratize access to financial services such as obtaining loans , opening savings accounts, managing income or planning expenses .
“We see that innovation in financial health is taking place mainly along these four axes. Today we find more startups focused on providing solutions for some of them, with alternatives for loans and access to capital for SMEs, " said Cossío. He also mentioned the " startups that are innovating in proptech; those that help workers increase their income, and even those that help people make payments and send money. "
"Today, these four branches of the fintech sector are complementing, or even exceeding, the offer of the traditional financial sector," concluded the Village Capital executive.
Therefore, if you are thinking of starting or investing in the financial technology industry, you should know that there is still a lot to do and that you have a huge potential market.