A recent report that focuses on the fintech sector in Colombia, conducted by the innovation and venture capital firm, Finnovista with the support of Visa, shows that there are already 369 fintech companies. In fact, they grew almost 20% since 2019 in number. And although investments in those new players exceed billions of dollars a year, they face challenges to such an extent that at the close of 2022, the mortality rate (i.e. fintech companies that had to close) was 17.9%.
The good news is that this mortality rate in Colombia, in 2021, went from 20% to 17.9% at the end of last year, but the challenge is that it is still a double-digit margin.
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Finnovista report highlights
As explained in the Finnovista report, “This slight decrease in the mortality rate is mainly due to the economic rebound from the exit of the pandemic together with the high capital injections received by the ecosystem in the subsequent periods. However, if this decrease in mortality is taken into account, together with the sustained growth in the number of Startups in recent years, a solid evolution of the Colombian Fintech ecosystem can be affirmed.”
And indeed, the investments that have moved into fintech companies in Colombia alone, if compared to 2019 to the close of 2022, have shot up more than 200%, jumping from US$1,275 million to a figure above US$3,855 million. The strength that the fintech exosystem is taking in the country is such that, the industry is positioning itself ahead of the US$3,386 million invested in Mexico and only surpassed by Brazil (at the Latin America level).
The skyrocketing investment in fintech companies and a decrease in their mortality rate is explained by the fact that these companies are offering new services that traditional banking did not have or that are complementary to them. “Fintech companies are enablers and developers of innovation to support the growth of the payment system,” said Adriana Cardenas, manager of Visa, a franchise that supported the sector research. The executive even highlighted how 48% of these fintech success stories are headed by a woman, very different from the levels seen in traditional banking dominated by male leaders.
Finnovista found that based on the experiences of the first four months of 2023, the bulk of fintech customers are concentrated in under-banked people (17.8% of the total), i.e. those who have a financial product, and curiously 16.8% of the pie are customers of financial institutions that have seen in these startups an arm to expand into markets they had not been able to reach.
In fact, the technological adoption of fintech companies is concentrated 60.9% of all the infrastructure they have in open finance (60.9%), that is, in breaking that barrier that exists between banks or financial institutions, or payment systems. “Open Finance is the favorite technology of Fintechs, it is a clear trend that we are seeing, it comes backed by the solid work of the regulator” added Andrés Fontao, co-founder and managing partner of Finnovista.
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First published in LR LA REPUBLICA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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