Financial startups in the region have raised $15.6 billion in a decade, leading the digital transformation and financial inclusion.
Over the past ten years, the fintech market in Latin America has emerged as one of the most dynamic and promising in the world. According to the FinTech Report 2024, produced by Distrito, financial startups in the region raised an impressive $15.6 billion in 1,658 investment rounds between 2014 and the first half of 2024.
Brazil is the major player in this scenario, accounting for $10.4 billion of the total investments, representing 66.67% of the amount, distributed across 1,034 deals. Despite global economic challenges, Latin American fintechs have managed not only to survive but also to grow and innovate, leading the digital transformation of the financial sector and promoting financial inclusion across the region.
Sector Growth Over the Years
The year 2021 was particularly noteworthy, recording the highest investment volume with $5.7 billion raised in 363 rounds. Meanwhile, 2019 was marked as the year with the most startups founded, with 298 new fintechs, totaling 2,214 active companies in the region at that time. Today, Latin America has 2,712 active fintechs, with 58.7% located in Brazil, followed by Mexico, which accounts for 20.7% of the total.
Credit fintechs lead in numbers, with 477 startups representing 18% of the total businesses in the sector. In terms of investments, digital service fintechs dominate, having raised $5.3 billion over the past decade. Credit solutions also stand out, with $3.1 billion received.
Innovations and Regulations
The Central Bank of Brazil (BC) has played a crucial role in advancing the sector by implementing significant innovations and regulations. Among the latest, the Pix contactless transaction, in partnership with Google Pay and Apple Pay, is set to launch later this year. Additionally, the BC is working on the regulation of Banking as a Service (BaaS), a model that promises to revolutionize the offering of banking services.
Another important initiative is the implementation of financial education programs in banks, aimed at increasing financial awareness and knowledge among citizens. These actions reflect a growing trend in the educational sector, as highlighted in the EdTech Report 2024.
Beyond Pix, the Central Bank is also developing Drex, a system in testing phase that uses a Real World Assets (RWA) token for transactions between individuals, businesses, and B2B transactions. On the legislative front, Brazilian fintechs now have the option to calculate Income Tax based on presumed profit, potentially reducing the tax burden by up to 50%. This change has the potential to make the national financial market even more competitive, encouraging the creation of new startups.
Key Trends in the Fintech Market
The fintech sector in Latin America continues to evolve, adopting emerging technologies and expanding its reach beyond traditional financial transactions. Artificial intelligence (AI) is at the center of these innovations, with 83 fintechs in the region already utilizing this technology, according to the Emerging Tech Report 2024. Generative AI is one of the most promising trends, with the potential to add between $200 billion and $340 billion to the global banking sector annually, enhancing personalization and strategic decision-making.
Asset tokenization is also gaining traction, with growth expected from $6.8 billion in 2024 to $23.4 billion by 2032, according to Market Research Future. This movement is not going unnoticed by the Central Bank, which is prioritizing the regulation of this new digital frontier.
In summary, Latin American fintechs have not only weathered the challenges of recent years but have also emerged as leaders in the digital transformation of the financial sector, embracing new technologies and expanding their services beyond traditional financial transactions.
