Financial technology or ‘fintech’ is an emerging industry that presents an innovative take on modern financial services. This industry goes hand in hand with the internet revolution, hence, both have grown exponentially. Fintech companies are therefore being considered potential online allies for traditional banking systems.
The uptake of fintech is especially successful in Latin America, where greater innovation of financial services improves overall financial inclusion and economic growth. In Peru, fintech is taking off and innovative businesses are receiving positive responses from both the government and its welcoming finance industry.
Fintech in Latin America
It’s well-known that Latin America is taking part in this technological revolution, as a willing consumer of methods that help bring more of its population online. Creating innovative ways to enhance the customers’ experience in financial services serves to reduce the unbanked and underbanked pockets of people in the region.
That’s why fintech is so well-received in the region; because of the isolated nature of some communities and the informality of small-scale business in those areas, only 11% of Latin America’s population has access to credit from banking institutions. Less than 40% of adults in Peru, Colombia and Mexico (three of the region’s strongest performing economies) have bank accounts. Fintech drives financial inclusion, and is set to improve access to financial services.
Finnovista, a platform analyzing access to digital finance, and the Inter-American Development Bank (Banco Interamericano de Desarrollo – BID) both provide annual reports of the growth of Fintech companies in Latin America. 2018 reports indicate that there’s a 66% increase in the number of fintech companies established in the region, compared with 2017.
Peruvian Fintech Development
Peru is part of the growing fintech phenomenon, and there are several companies operating in the country. Last year, Finnovista and the BID stated that Peru presents one of the highest growth rate in fintech company establishment and development, with a 256% increase in annual growth.
Innóvate Perú is a national program that belongs to the Ministry of Production, which helps to increase the innovation in business processes and growth of startups in the country. The program also promotes innovative entrepreneurship, and facilitates the absorption and adaptation of new technologies by existing Peruvian-based companies.
The advance of digitalization has affected financial activities so much that now, only 5% of transactions are made in person in Peru.
Financial institutions are responding
As fintech successfully expands into and shapes a new, modernized Peruvian finance market, it has caught the attention of major monetary players.
To adjust to this tech evolution, the Banco de Crédito del Perú (BCP) intends to partner with 5 new fintech companies in order to make its services more easily accessible. This will enhance its value proposition to clients who are now accustomed to using personal devices to interact with their finances. Percy Urteaga, Retail Banking Manager of BCP, stated that the bank also aims to further automate its internal processes, and expand its services to new clients by building a greater online presence and approachability.
The Lima Stock Exchange is planning to invest in invoicing digital platforms, and electronic promissory notes and bills of exchange. The group will assign 40% of their whole investment in 2019 to enhance their services, according to Victor Sanchez, Corporate Deputy General Manager of the Lima Stock Exchange.
In addition to being a dynamic growing economy with political stability, Peru is also becoming increasingly familiar with cryptocurrency transactions. It is the country with the third-largest number of digital transactions in Latin America, according to Stefan Krautwald, Member of the Latin American Board of Directors at BITPoint.
However, this is still a new industry for many Latin American nations, and there are still pending regulations to be issued in Peru. BITPoint is having conversations with the Superintendencia de Banca y Seguros and the Banco Central de Reserva about best practice for cryptocurrency activities.
Lima Fintech Forum
Peru is looking to build an environment conducive to healthy fintech startup growth. Consequently, both private and public sector actors support the Lima Fintech Forum, first created in 2017, and organised by the Universidad del Pacífico.
The aim of this annual forum is to introduce the fintech companies as allies of Peruvian banks by demonstrating the benefits of working together. Cooperation between ‘the old and the new’ will strengthen banks’ and startups’ value to customers, and extend their reach to previously unbanked populations.
This event is also vital for attracting the attention of national and foreign investors, and connecting institutions, regulatory bodies, banks, and entrepreneurs with each other.
Peru’s government will keep supporting the modernization of its financial services in order to achieve greater financial inclusion and drive the economy forward.
Opportunities for business
Needless to say, with government support and opportunities to connect with industry players, Peru is an easy choice for developers, investors and entrepreneurs moving into Latin America’s fintech scene.
The country’s powerful banking institutions are on board, too. They’re seeking valuable partnerships with fintech companies to ensure win-win commercial benefits. This in turn, boosts Peru’s financial inclusion by offering greater access and convenience to people and communities that have so far been out of reach of the finance industry.
This is the ideal time for financially innovative businesses to make their move. Take advantage of this optimal environment for development and long term commercial success. Early movers have the chance to establish themselves now with a great deal of support, and shape the future of financial services in Peru.
Follow world trends via Fintech100
An annual Fintech100 report acknowledges the most innovative fintech companies over the world that are creating digitalized financial products and services. It contains the “Top 50” established companies and the “Emerging 50” companies whose models are at the forefront of innovation, development and disruption.
According to this report, the Top 50 companies raised around US$28 billion last year and over US$50 billion in aggregate capital over their working life so far. Likewise, the Emerging 50 companies raised over US$1 billion in 2018 and almost US$2 billion since they were founded.
Need local advice to get started? Contact the experts
Uncertainty around local company formation procedures shouldn’t be a barrier to opportunity for your business. Peru offers a highly attractive environment for success in technological innovation.
To get started in Peru without any undue delay, get in touch with Biz Latin Hub. Our Peruvian team offer in-depth advice and guidance on local compliance and formation processes for new businesses. Our range of market entry and back-office services is fully customizable to your company’s needs.
Reach out to us today at [email protected] for a personalized quote.