More often than not, when you think about Latin America (LatAm) in a financial sense, you think of Brazil. Not only is it the largest country by size, but it also has the highest GDP in the region (with an estimated value of $1.9trillion). However, other LatAm countries have a lot of opportunities for expansion which are not currently being capitalised upon.
One opportunity specifically which is seeing a lot of attention in LatAm is open finance. The UK has led the way when it comes to open finance innovation, and many countries are now following suit. However, despite their eagerness to improve the tech, the current development and implementation of open finance in LatAm is lacking. UK organisations can help through expansion.
Chile and Colombia have both recently passed new open finance regulations. This is particularly promising for all players in the region – consumers and merchants alike – as according to Banking Tech, over 50 per cent of the population in LatAm does not have access to traditional banking services. Open finance is a viable solution that will improve inclusion; UK organisations can play a key point in facilitating this.
A different space
Expansion is difficult though. Especially when moving to a region which has a completely different culture and language. However, one organisation that is helping UK firms overcome this barrier is Medible. The organisation originates from Chile and helps businesses create the next generation of their product. It ensures big players in the field are able to remain competitive through innovation and good partnerships.
Within most countries in LatAm, the financial sphere is very concentrated. There are around four major players in the space and they have a grasp on every sector of the market. This includes banking, insurance and so on.
The introduction of UK organisations will provide some depth and variety to the market. Rodrigo Malachias, CEO of Medible told The Fintech Times: “We want new players because it creates competition. Competition is a beautiful thing – it forces you to do better and that’s healthy for a market and company.
“Not only is it an interesting change to the market, in my opinion, it is needed.”
Why expand to a smaller country over an established one like Brazil
Medible, although created in Chile, now has influence in 13 countries. Nonetheless, it still sings the praises of its country of origin and believes it still has a lot of potential which is yet to be explored. Explaining why a company should expand to a smaller country over an already established one, Malachias said: “People always think of Brazil and Mexico when they think of LatAm. This is largely due to the size of the opportunity there. However, the size of the opportunity comes at a relative cost.”
“It is risky for an organisation to set up in these countries as the competition is already very strong there, and establishing yourself can be costly. Meanwhile, a country like Chile is much more close-knit. In addition to being the only country in LatAm that is a part of the OECD, it has a really strong legal system which means everything runs smoothly, as it should. Furthermore, it gives businesses a chance to get to know potential partners at a much smaller cost.”
Expansion is a risk amid a lack of funding
This year has seen a notable drop in fintech funding. Every country has felt this impact, though some have felt it harder than others. With less funds to play with, many organisations are playing it safe. However, a low-risk high-reward opportunity lies in Chile, according to Malachias. For an organisation to set up a competitive organisation in an established market like Brazil or Mexico, they would likely have to create a local team to have an impact. This is extremely costly.
However, this is not necessary when expanding to a smaller country due to there being less players but equal opportunity. “It is fundamental that C level executives area able to talk to fintech founders in the region, and this is much easier in a country like Chile,” said Malachias.
The Medible offering
Explaining the Medible offering, Malachias broke down how the company links banks and fintechs together, ensuring that fintechs are not the ones being charged to make a difference. Rather they are able to use their services to help tackle a challenge Medible has targeted. It acts as a bridge for UK firms to enter the LatAm scene, providing help with any cultural or language difficulties but also ensuring the C-suite execs meet the correct people from the banks in the region.
In Chile, there is a generally higher-speaking English populace, but nonetheless Medible helps with any issues. This does make entry into the market easier though. “It’s a minor detail but it is very impactful in the grand scheme of things,” he explained.
Notably, the companies that are finding a lot of success currently are those working in embedded finance. With the development of open finance regulations, many banks are finding themselves wanting to integrate the technology, but lacking the expertise. This is where UK fintechs can step up.
According to Malachias: “Borderless transactions hold a huge opportunity for fintechs too. The scene is developed in the UK and Europe, but in LatAm there is only one fintech enabling international transactions in Chilean pesos or Argentinian pesos. We helped them break into the region too – Wise, the UK-based foreign exchange.”
Medible has bridged a collaboration between Wise and Banco BICE, a Chilean bank and according to Medible, “this is only the beginning”.
Francis Bignell
