Finnovista Report: 300 Fintech Companies and 121 New Projects in Chile

The venture capital firm Finnovista and Visa, a multinational financial services company, have recently presented the fifth edition of the joint Finnovista Fintech Radar Chile 2023 report. This research and analysis report highlights the latest trends and emerging startups in the dynamic fintech ecosystem.

The fintech ecosystem in Chile has experienced remarkable growth, reaching a total of 300 operating startups in the market this year, according to the report presented. This figure reflects an impressive compound annual increase of 29.5% since the last radar published in 2021, which counted 179 fintech startups in the southern country.

Analyzing historical data from the Finnovista Fintech Radar in Chile conducted with Visa, it is observed that the compound annual growth between 2019-2021 was somewhat lower (26.4%), reflecting the acceleration of the financial sector for innovation and entrepreneurship in Chile over the last five years.

Regarding the distribution of the identified ventures with respect to the different segments considered in the study, it can be seen that more than half of the ecosystem is made up of Payments and Remittances Fintech (20.7%), Enterprise Financial Management (17.3%) and Lending (14.3%). These segments are followed by Insurtech (10.7%), Wealth Management (10.3%), and Enterprise Technologies for Financial Institutions (9.7%), while the remaining groups account for the remaining 17.7%.

The trends observed are in the Lending branch, with a boom in Factoring & Invoice lending solutions focused on Chilean SMEs, and in Wealth Management, where a multitude of new solutions have appeared focused on the Digital Wealth Management sub-segment through online platforms for the offer and provision of wealth management services aimed at breaking down barriers to access to assets and investments that have so far been little democratized in the investment world.

Read more about the latest report on the fintech sector published by Finnovista and Visa and find the latest economic news of the day with our companion app Born2Invest.

Chilean startups in the interest of funds

Currently, Chile is positioned as the fourth Latin American market with more activity in raising venture capital so far this year, behind Brazil, Mexico, and Colombia.

According to LAVCA, 35 deals have been completed in the Chilean ecosystem in the first half of 2023, a figure very close to the 38 transactions closed in Colombia -which is positioned as the third country with the most venture capital investment activity so far this year-. Although only 14 transactions were registered in the first quarter of the year – the lowest figure in years – there was a considerable increase in the second quarter.

In this second period, 21 transactions were recorded, representing a 50% increase quarter-on-quarter. These 35 deals represent 10% of the total number of transactions that have taken place in the first half of 2023 across LatAm. In these rounds, Chilean startups have raised US$ 129.5 million.

Likewise, when analyzing the evolution of the ecosystem in the last 5 years, the Finnovista Fintech Radar conducted together with Visa reveals that venture capital investment in Chile has experienced a compound annual growth of 84%. In 2018, investment in this asset class reached US$ 46 million, a figure that has multiplied considerably reaching over US$ 528 million in 2022.

Everything is in favor of Chilean fintech companies to expand

According to Andrés Fontao, Co-Founder and Managing Partner of Finnovista: “Chilean entrepreneurs are already showing great potential to expand their operations in other markets in the region, and to be a fundamental part of the Latin American fintech ecosystem. It is worth noting that the Chilean government is also already responding to some of the challenges facing the country, focusing on promoting financial inclusion through innovation in Open Finance, as well as the development of public policies that promote access to digital credit and the inclusion of the informal economy.”

Finnovista believes that this economic outlook can provide an enabling environment for the development of the fintech ecosystem in Chile. With an economy in transition towards more sustainable growth, fintech startups can play a crucial role in the diversification of the financial system, offering more accessible and agile solutions for citizens and businesses.

For his part, the Country Manager of Visa Chile, Francisco Valdivia, pointed out that “the Radar data, which Visa and Finnovista are promoting, reflect very well the situation of this sector in Chile, a country with the right conditions for the creation of fintechs and which provides a favorable environment for the growth and development of startups”.

“In relation to the financial system, approximately 90% of Chileans have some kind of bank account and, also, around 90% of the transactions they make are contactless. Still, we see a great opportunity in terms of financial inclusion, where fintechs are a key player. A diverse fintech ecosystem is a driver for a country’s inclusive and sustainable economic development, as it facilitates greater access to credit and generates a variety of new digital products and solutions. At Visa we will remain committed to supporting fintechs, which are providing innovative solutions and empowering small and medium-sized enterprises, an essential component of our economy.”

Challenges and advantages of Chilean Startups

The Chilean ecosystem wields technological adoption as a hallmark against the rest of the region, and the fintech entrepreneurs who have participated in the Radar point out that expanding to other markets is their great challenge.

Chilean startups have notorious competitive advantages. 46.7% of them point out the faster adoption of new technologies as their main differentiator compared to other countries in the region. In addition, the study reveals a noteworthy finding: more than half (54.7%) of these fintechs already use Open Finance and APIs, technologies that lead with the highest percentage of adoption, surpassing others such as Cloud Computing (42%) and Artificial Intelligence and Machine Learning (38%).

On the other hand, among the various challenges faced by these companies, internationalization and scaling operations are the most worrying, with 51.3% of the fintechs surveyed indicating it as the biggest challenge. This is followed by the launch of new products/services and access to financing, with percentages of 14.7% and 8%, respectively.

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(Featured image by Juan Pablo Ahumada via Unsplash)

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First published in America economia. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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