In this exclusive interview with FinteChile cofounder and executive director, Ángel Sierra introduces the role that the fintech association plays in supporting the fintech ecosystem in Chile and a few fintech trends he is most excited about.
Can you tell us a bit about the association, FinteChile?
FinteChile started four years ago with the aim of boosting the country’s fintech sector. When it was established, it had seven member companies, out of the seventy-five fintech companies that existed then in Chile. Today, FinteChile has 108 member companies, out of over 230 companies in the industry. The industry has seen constant and exponential growth since then.
This is due to the opportunities in innovation and financial inclusion in Latin America. You should know that Latin America is a region where 50 percent of the population does not have access to financial services – I am talking about not just Chile, but the whole region. The latest study by the Inter-American Development Bank (IDB) showed that fintechs have tripled in the last three years. In 2017 there were 700 companies and today there are more than 2,300 in the region.
Chile is no exception. It follows that same trend and today Chile’s fintech ecosystem is fifth in terms of the number of fintech companies, after Brazil, Mexico, Colombia and Argentina. But it is also important to highlight that Chile has the highest number of fintech companies per million inhabitants, so that is an interesting indicator insofar as it shows that there is a significant adoption of fintech in the country. That definitely leads us to think that the growth of the ecosystem will continue, along with the opportunities that come with it, such as increasing financial inclusion, arrival of new investors, greater collaboration with the banking sector and obviously building the corresponding regulatory frameworks to support the growth of the fintech sector.
As a Colombian, when and why did you move to Chile?
I came to Chile 10 years ago. I used to work with Banco Santander, and ten years ago, Banco Santander in Colombia was acquired by CorpBanca, a Chilean financial group whose current owner is Itaú, a Chilean banking company. At the time, when that purchase took place, the Santander Group Bank offered me a position in Chile, so I came to Chile.
Sometime later, I left to establish my own fintech startup. That was how I made my foray into the industry, first as an entrepreneur and later with the creation of not only FinteChile, but also the fintech association in Colombia (at that time I was also part of the board of Colombia Fintech), so that’s how I connected with Chile and fintech, though I currently only work with FinteChile.
Interest in fintech has grown a lot in Latin America. What are the most important trends you see?
There are several phenomena. The first is the significant growth of the entire category of digital payment processing in Chile and Latin America. One of the main reasons is the digitalisation of money, and there has been significant progress in the adoption of payment methods and e-commerce. It is necessary to have a means of payment to be able to make purchases on the internet. This payment vertical is the one with the most investment growth and this should continue for the next couple of years because, as I mentioned earlier, half of Latin America does not have access to basic financial services.
The first payment product that people usually have is a debit card or a prepaid card, which ultimately becomes a digital means of payment. The opportunity here is huge; more companies will enter the space, and the ones already here will keep growing. There is a huge challenge associated with the digitalization of money.
A second big point is everything that has to do with Open Finance. Latin America has already started to adopt this concept of open data in the financial system (with the prior consent of the user). 2022 will be a key year in which several Latin American countries will take the plunge. Chile has already started to do so with its fintech law, which includes the whole topic of Open Finance, and as the pace picks up here, we expect to see the approval and adoption of Open Finance by more governments and regulators in the region.
So I would say that those two points are the two big trends in the region and it is very positive because both of them encourage the arrival or birth of new Fintech companies, so good news all around.
What do your members think about fintech developments in China or Asia? Is there interest in Asian markets?
I would say very little, though it has caught our attention. A year and a half ago, when we conducted a fintech survey in partnership with EY, we were able to identify that the focus of the companies for growth is the Pacific Alliance, specifically Mexico, Peru, Colombia. Europe, the United States and Asia were not on the radar; our members concentrate on those first three markets in particular, so there is an important need to connect and educate them about what is happening in Asia.
However, it is complex for a Chilean company to go to Asia, given that there is strong competition there and the market conditions are very different. I think it is much easier for an Asian company or investor to come and capitalise on the opportunity of a Chilean fintech. For example, an Asian fintech company could enter the region by forming an alliance or buying a Chilean fintech or, on the other hand, an investor could come and invest in a fintech company to take advantage of all the growth that this sector is experiencing here.
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