These companies provide financial solutions sought by thousands of users, and have created their own market.
At the beginning of 2022, around one in four fintechs worldwide were from Latin America, according to a study by the Inter-American Development Bank. In addition, the Fintech Guide 2021-2022 noted that there were 171 fintechs operating in Peru as of the end of 2021 – illustrating how important this sector is to the country today.
Fintechs in Peru have multiplied in recent years and become major solutions for users, but also for banks and companies looking to improve their customers’ experience.
Finance has changed radically in recent years. Many people avoid going to the bank to make a transaction, preferring to do it via an app, and prefer exchanging money online to visiting a physical exchange. Startups uncovered niche markets where a need was unmet, and created a business opportunity by offering a solution.
Peru is home to a number of success stories in Peru… but first, let’s break down the concept of fintech.
The term is a portmanteau of “Finance Technology”, and applies to companies which provide financial services and products using technology. Their offering is intended to make life easier, more practical and flexible – like the procedures mentioned above, which previously took place in banks or bureaux de change, but can now be done online.
Websites or apps can provide solutions using Big Data, and special software that draws on artificial intelligence. It is not necessary to use all these types of technology, or the blockchain used by cryptocurrencies. The idea is to save time, reduce costs (in some cases) and enhance financial inclusion.
This improvement of financial services has become a priority for users nowadays, hence our examination of the main services currently offered by fintechs, such as pre-approved loans, money transfers, investment management and online payments.
In Peru, regulation and legislation is making progress. 2020 saw an emergency decree on crowdfunding for fintechs, and this type of company is organized by the Fintech Peru Association.
Money transfer
With the advent of technology, companies were formed to make it easier to transfer money between people or companies, in the same country or abroad. Consequently the market, previously controlled by banks, witnessed not only lower commissions, but also reduced waiting times, with applications requiring just a cell phone number or DNI (national identity card).
Money exchange
Peruvians often avoid visiting bureaux de change and banks due to a lack of time, and unfavourable exchange rates. In response, online exchange houses were set up, allowing users to make these transactions digitally, quickly and safely.
Financing
These types of companies put individuals and companies in contact with investments, while offering advice on whether they are a good fit. As in any other like-minded business, interest is paid and returned to the investors.
Mobile payments and collections
Scanning a code and paying via app has become a trend in Peru, preventing trips to the ATM and making transactions quicker and safer. Several fintechs lead this sector, some of which have been acquired by banks and other large Peruvian companies. A number of internet payment gateways have also found a market niche.
Other types of fintechs, such as alternative financing, seek to include individuals who are “unbanked”, and SMEs seeking money to develop their projects. Another interesting industry, insurance, can now be purchased in different guises (auto, health, life) simply by clicking and signing digital contracts.
The fintech industry has grown steadily in Peru over the last 8 years, at an average rate of 20% per year. Among the greatest challenges to overcome are the generation of financial alliances, and the search for financing to make these companies grow exponentially.
Reviewing internal factors for Peruvian fintechs’ accelerated growth, their technological innovation, business characteristics and security set them apart. The business owner’s seal, and the image with which businesses seek to position themselves, make a big difference as well.
According to the Journal of Management Sciences, external factors such as market conditions also play a part. Support and mentors are key to growth, as are proper regulations which have helped these businesses to position themselves domestically. Peru has many business niches which have yet to be exploited, offering a range of financial and technological opportunities.
Kambista
This virtual exchange house was created in 2016 and allows people to exchange money online via its mobile app. Users include sole and dollar account holders from any bank in the country, although the process is faster with a few banks in particular. The company grew exponentially during the pandemic, when many people were barred from leaving their homes. Having gained roughly 1,000 new users per month in 2019, its monthly user acquisition rate practically doubled by the end of 2020.
Yape
This Peruvian fintech was created by Banco de Crédito del Perú (BCP), one of the largest banks in the country, to solve a longstanding problem: a lack of cash meaning no change for a bill, or delayed transfers. Thus Yape was born, allowing instant transfers of small amounts using a cell phone number or QR code. Yape is now widely accepted as a form of payment around the country.
Prestamype
Another Peruvian fintech success story, Prestamype connects small and medium-sized companies with loans to help them grow their business. Investors are looking for a higher return on their savings, and the company guarantees returns of 20% or more per year, following a thorough evaluation.
With these examples in mind, we can conclude that the fintech market is growing not just in Peru, but throughout Latin America. If you are interested in this topic and other business-related issues, check the Sherlock Communications blog and our social networks, where we share relevant content on a number of regional industries.
