What’s the latest news of fintech in Colombia in 2021?
In an increasingly globalized world, technology has come to the forefront as the preferred medium in which we diffuse information in the blink of an eye.
It has sharply changed the way we conduct our daily lives.
This is largely due to the rise of social media and the dissemination of digital information through platforms like Google, Facebook, and YouTube.
The South American country of Colombia is proof that it’s not slowing down any time soon.
Before we jump into Colombia’s fintech developments, make sure you take a look at our latest on Colombia’s creative economy!
Developing countries are now tapping into the power of the Digital Revolution to solve what were once thought to be unsolvable problems.
These include absolute poverty, education inaccessibility, fossil fuel dependency, and fatal illnesses. This technology helps impoverished people and nations develop their resources and consequently lift them out of poverty.
Banking is one of the largest industries to wholeheartedly embrace disruptive digital technologies, like digital banking and fintech (financial technology), for example.
But here’s why fintech is so much more than just a buzzword.
Fintech in Colombia 2019 has grown due to the country’s knowledge of the power that technology can have on a nation.
But first, we must answer the question…
Financial Technology, or “fintech,” includes all technological and software services that come from the financial industry.
Pretty simple, right?
This means that if you’ve used ApplePay, Venmo, PayPal, you’ve used fintech. If you’ve transferred money using an app, downloaded your own bank’s app, donated to a crowdfunding effort, or engage in Bitcoin, you’ve also used FinTech.
Both private individuals and companies at every level use financial technology to better manage and simplify their financial operations at an arm’s reach.
It is a $100 billion USD global industry that’s quickly changing the way we engage with banking and finance itself, with payment and lending software receiving the most funds from investors.
And it’s not expected to slow down any time soon.
In 2017, investment in fintech rose 18%, with several mega-deals taking place in 2018 that made fintech investment nearly double.
With these upward trends, it’s no wonder governments like Colombia want to look into fintech as a way to stimulate economic development.
Take Kenya as an example.
They launched a mobile-banking system called M-PESA, created by Vodafone for Safaricom and Vodacom (mobile network operators) in 2007.
Its purpose was to microfinance loan repayments via phone call but later expanded to a general mobile banking system.
M-PESA has since become East Africa’s leading digital wallet. As a matter of fact, 17 million Kenyans (about two-thirds of the adult population) use the banking system, seeing 25% of the country’s GNP flow through.
Because of its mobile structure, it reduces the costs of handling cash and thus lowers interest rates.
The system is straightforward:
After signing up, Kenyans can deposit and withdraw their money using one of the 40,000 cornerstone agents throughout the country. This allows them to:
The effect?
All of this efficiency has come back into the Kenyan economy. Since M-PESA’s inception, incomes have increased 5-30%, it has lifted 2% of the population out of extreme poverty, and has galvanized more start-ups to appear and take root in Nairobi.
M-PESA (and its imitators) have expanded into other developing countries, including Tanzania, Afghanistan, India, South Africa, Romania, and Albania.
So why wouldn’t Colombia want a piece of the pie?
With the power of Fintech in mind, it’s easy to see why Colombia is on board. Here’s what the Colombian financial technology clima (climate) currently looks like.
Colombian President Ivan Duque pushed for the passing of Ley TIC, which hopes to modernize the New Information Technology and Communications sector (TIC).
This would digitally connect 20 million Colombians that previously did not have a reliable internet connection.
This Ley TIC (TIC Law) recently passed the Colombian House of Representatives (June 5, 2019) with 93 positive votes and is currently on President Duque’s desk for his approval.
In a June 2019 speech at a banking convention, Duque himself called to amplify financial service coverage via digital platforms, and subsequently, give way to inclusion.
Long story short: the passing and ratification of Ley TIC is very likely.
In Colombia, the three main fintech segments are:
The work that has been done on these segments has seen an unbanked population of over 50% drop to roughly 23% of the population since last year.
Since 2015, the federal government has been steadily:
New standards now push for cashless transactions and digital finance as a whole, like mandatory e-invoicing.
Bottom line?
Financial technology looks super promising in Colombia 2021.
Traditional banks are also embracing financial technology.
With smartphone usage at an all-time high, some of Colombia’s largest banks like Davivienda and BanColombia are using fintech to facilitate growth and customer interaction.
The Daviplata app, created by Davivienda, can be used to:
The Daviplata app extends even further than simply conducting business with private individuals and firms. Davivienda actually has a contractual agreement with the Colombian government to distribute payments of Familias en Acción, a social welfare program that helps 900,000 underprivileged families.
This has not stopped unorthodox banking solutions from entering the Fintech Colombian market. Banks like Nequi and Bankity offer alternatives to those who do not have access to (or those who choose not to use) traditional commercial banks.
Nequi follows a similar business model as M-PESA: they offer a free service using mobile technology, in which consumers may deposit, withdraw, transfer and manage their money using already-established infrastructure.
Bankity, on the other hand, is more involved, helping consumers track their personal finances using a smartphone app and an intelligent bank card.
Investors have taken notice of all this growth. They have funneled over $7 billion USD in venture capital investments throughout all of Latin America. This includes Colombian startups Platzi and Rappi, who have raised millions from international and domestic venture capitals.
Of course, there are challenges and setbacks to Fintech growth in Colombia, such as the financial transaction tax and general concerns about privacy and security online.
Both of these drive many businesses and consumers to remain cash-only and avoid the hassle.
But that hasn’t stopped fintech in Colombia from thriving.
Colombia has secured its spot as the third-largest fintech ecosystem in the region with 200 startups, after Brazil and Mexico.
It holds one of the largest potentials in LATAM because of its expected growth, and is shaping up to be a prime location for those that seek to expand their operations down south.
Ready to join the fintech growth wave in Latin America? Our expert multilingual content marketers are here to take you under their wing!
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Also, be sure to check out our latest report on the Colombian markets, with the Orange Economy report!
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