Dressed up with nowhere to go

Fintechs moving faster than market adoption.

The COVID-19 pandemic has forced an acceleration in digitalisation across the globe as many people ‘work from home’ while their children partake in ‘online learning’. This has been a boon for many financial software technology businesses but in Latin America there are two major barriers to adoption: culture and inadequate infrastructure.

Cash is still king in Latin America: 85% of transactions are cash-based and only 39% of the population has a bank account due to weak banking infrastructure, lack of access to credit and a mistrust in financial institutions. It is going to take more than a flashy user interface and some slick programming to overcome this.

It is also important to note the size of the informal employment sector. In Peru, for example, 73% of the working population is informal according to official figures from the National Institute of Statistics and Informatics of Peru (INEI). This is a headache for the government so there are numerous initiatives aiming to change this but it won’t happen overnight.

“The digital transformation of companies is decisive and cannot be postponed.”

CEO of a global financial group, Peru.

There is also a significant barrier in terms of infrastructure. A credit analyst in the telecoms sector saw access to computers as a barrier, “At the beginning of the pandemic, one of the main problems was that 47.5% of households did not even have a refrigerator so they are unlikely to have access to a laptop.” In terms of mobile devices, according to GSMA Intelligence, in 2018, while 79% of the population had a mobile connection, just 53% of the population had mobile internet subscriptions.

The larger banks believe digital transformation is inevitable, “The digital transformation of companies is decisive and cannot be postponed,” explained the CEO for Peru of a global financial group, “Mexico has led the way in real-time payments in Latin America, we are trying to follow suit.”

“People [in LatAM] are extremely suspicious of online Apps, you need to educate the user.”

Risk Classifier.

On the surface, these changes seem positive but as Risk Classifier told us, “…people are extremely suspicious of online applications, you need to educate the user. The bank represents an asset of trust and credibility for its clients, it is a bunker that protects people’s data and money.”

In the meantime, fintechs plough on with the hope that if they build viable alternatives the people will come.

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