In Colombia, underdeveloped fintech segments including investment management/wealthtech and banking infrastructure represent a market opportunity for Swiss fintech companies, which have over the years build up expertise and competencies in both areas, a new report by Swiss governmental agency Switzerland Global Enterprise (S-GE) says.
With more than 320 companies, Colombia has the third largest fintech ecosystem in Latin America (Latam), a burgeoning industry that has been driven by the country’s young population of digital natives, rising demand for digital financial services, and stable legal and political environment.
This landscape has fueled the rise of a fintech industry that’s now largely dominated by early-state fintech services serving the underbanked, including neobanks and payment providers, leaving plenty of opportunities in the fields of wealthtech, banking technology, and more broadly fintech enablers, a paper says.
In comparison, Switzerland is a world leader in banking technology and wealthtech, building on the country’s historical leadership in innovation, banking and wealth management. This expertise, coupled with rising demand for these solutions in Colombia, are opening up opportunities for Swiss fintech companies in the country, it says.
Investment management and wealthtech companies represent only 24% of all fintech firms in Colombia, making it a young segment that’s nevertheless emerging rapidly. The sector is poised for growth, the report says, and will be driven by tech-savvy millennials demanding low-cost and transparent modern trading platforms and robo-advisors.
Banking infrastructure, a category that accounts for just 11% of the whole fintech startup landscape, is another segment with strong growth potential. This industry will rise on the back of modernization efforts by incumbent banks. These will be looking to replace their decades old core systems to keep up with cloud-native neobanking leaders, the paper says.
Opportunities in payments and remittances
Besides these two market opportunities, other fields are also worth exploring. For example, 35% of fintech companies in Colombia offer online lending solutions to consumers, making it a fairly developed and crowded space. However, the persistent funding gap means that no real leader has emerged yet.
Opportunities exist in the payments space as well where evolving customer expectations will increase demand for frictionless processes, outstanding experiences and great customer support. In this landscape, providers of payment solutions that are easy to integrate, cheap and work across platforms will have an edge, the report says.
Cross-border money transfer is another appealing segment, especially considering the amount of money overseas Colombians send back home each year, an estimated US$7 billion in 2020, according to data from the central bank of Colombia. Colombia is also home to two million immigrants and refugees from neighboring countries who send money back to their home country as well.
SME financing gap
Although Colombia’s fintech sector pales in comparison to regional leaders Brazil and Mexico, the country has the highest fintech adoption rate in Latam with 76% of consumers using some kind of fintech service, according to the EY Global Fintech Adoption Index 2019.
Still, 62% of small and medium-sized enterprises (SMEs) in Colombia do not have access to financing, a market opportunity which digital lending platform Finaktiva is looking to tap into. Recently, it acquired Libera Supply Chain, a factoring startup, to pursue its ambition to build a neobank for SMEs.
Last month, fintech startup Paymovil won the API’s Challenge, a competition organized by telco operator Claro and industry trade group Colombia Fintech to solve specific industry problems. Paymovil took the grand prize for an innovative electronic payment solution for SMEs that works through Near Field Communication (NFC).
Tuya took the second prize with a proposal for tailor-made financing in a buy now, pay later (BNPL) model.
This article first appeared on fintechnews.am
