All those fintech investments had a real impact on banking penetration in Latin America

What impact do startups have? Is there in the world? Often, a heck of a lot. And when a group of startups tackle similar problems, they often make a big difference in everyday life. When it comes to access to finance in Latin America, new data indicates that startups are having a big, and measurable, impact.

As the global venture capital market contracts, Latin American startups have raised significantly less than in other markets that TechCrunch tracks. This is by no means a new trend, but the statistics are clear now that we are more than halfway to 2023.

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a new one Atlantico reports indicates that venture capital volume (measured in billions of dollars) in Latin America declined by 65% ​​in the second quarter of 2023 compared to a year earlier. Notably, this indicates that investment in fintech, the segment that has historically attracted the most capital in the region, has also declined in the region.

It’s obviously not encouraging that Latin American startups are facing a more severe lack of funding than other markets at the moment – not all the news there is bad, it’s worth noting – but looking only at the bad news at the moment would mean we’re effectively ignoring how much impact startups have had in the region. to do In particular, we are talking about startup investment, fintech and the impact of Latin American consumer finance.

In Latin America, fintech has long been a sector that startups love to tackle. It’s not hard to see why: the region has been and will remain significantly underbanked compared to many other large countries. In its report, Atlantico compares Latin America with India and the US, noting that from 2011 to 2017, bank account penetration in Latin America rose from 39% to 55%. In contrast, India penetration increased from 35% to 80% over the same period, while that of the US increased from 88% to 93%.

Things look different after 2017 though. Bank account penetration increased from 55% to 74% in Latin America, while in India, it decreased from 80% to 78%.

No national statistic is influenced by a single factor, so we don’t want to overstate the case. But, given how many fintech startups raised money (and poured money into investor buckets) during the last venture boom in Latin America, it’s not hard to connect rapidly improving bank account penetration with startup activity over the same period. All that capital had a real impact.

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