Within the payments market, we also see a lot of growth in financial services, specifically in e-commerce platforms where consumers and companies want to buy shares in different markets. Although the market is currently volatile, investors see buying opportunities around the world. GoTrade in Asia is a good example of this, as it allows Asian investors to buy shares of US companies.
We also see digital goods and services verticals like online education platforms where entrepreneurs can create and sell courses to consumers across regions like Hotmart in Brazil. In addition, payment and payroll platforms that help participants in the “creator economy” are seeing tremendous growth, with Wool in Europe we can see the rapid growth in this segment.
It is also important to note that companies in the sector are growing rapidly because they offer better and more advanced technology than other legacy providers such as banks. Fintechs bring innovation and more advanced technology that can be implemented in a variety of ways to solve business and consumer problems. Banks often struggle in this regard as they mostly use older technology to run their business. The promise of fintech is to “unbundle” technology and allow new business models to come to market that meet the needs of how consumers want to pay or collect their money. Fintechs do not force new companies to have their infrastructure.
In this way, they help entrepreneurs and startups to reach new geographic markets by enabling them to access various local payment methods in LATAM and around the world. For example, eCommerce businesses will continue to grow in the wake of the pandemic as entrepreneurs know they need to expand their borders and consumers are more receptive to working with businesses that accept their preferred local payment methods. Such could be the case of an Argentine entrepreneur who wants to sell in a cash-rich economy like Mexico because he knows that he will be able to get paid through a digital transaction.
The above is an example that the need for easier access to local and cross-border payments by businesses continues to grow rapidly. Cross-border payment flows are expected to reach $156 trillion in 2022 and grow at a CAGR of 5%, according to Ernst and Young.
Digital payment platforms became even more robust between 2020-2021, partly driven by the pandemic, which forced many industries to open their doors to digital payment methods. The digital payments market is expected to grow to $5.8KB in 2021 from $5.0KB in 2020, at a CAGR of ~16%.
In a region where cash and other traditional forms of payment had dominated, arguably, region is expected to have a major effect on those projections. In 2022 we can, based on data, predict that digital commerce will have significant growth, and that more and more small and medium-sized companies realize that digital platforms expand their horizons to markets where it would otherwise have been more difficult to open.
Interact with States
On the other hand, it is imperative that fintechs must comply with local laws and regulations on topics such as taxes and regulations, since there is money involved. They must maintain good governance and relationships with financial authorities and local regulators. Therefore, we notice that a link is being consolidated between fintechs and governments in which each one is doing the part in which they are good. They don’t really compete with each other.
Generally speaking, innovation and entrepreneurship are not driven by the government sector in any market. The fintech segment sits at the intersection of technological advancements and commercialization because new business models are facilitated through a flexible payment infrastructure that can be integrated into any business process. Companies realize that having a payment relationship with the end customer opens up innovation across the business spectrum.
Recently, from a survey we conducted of Latin American consumers about their attitudes towards digital payments in Argentina, Brazil, Colombia Y Mexico, We confirm that there is a great interest in buying goods and services using social commerce platforms (63% of Brazilians surveyed said they have already made purchases through social networks (IG/FB), not far behind are Mexicans with 57% , Colombians with 54% and Argentines with 38%), and managing their money through relationships with neobanks in certain markets.
Consumers are very open to more innovative ways of buying, paying and managing money, but it takes the technology of fintechs and forward-thinking companies to offer these types of solutions.
Obviously, we know that fintechs must comply with local laws and regulations on things like taxes and regulations, since there is money involved. They must maintain good governance and relationships with financial authorities and local regulators. Therefore, we notice that a link between fintechs and governments is being consolidated, in which each one is doing the part in which they are good. They already know that they don’t really compete with each other.
Source: Ambito
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