How to Get the Unbanked Banked in LATAM
- The World Bank Financial Inclusion Index unveils a significant gap in the region.
- Experts proposed some solutions to the matter.
The banking sector in Latin America has been booming in the last few years, although the experts who talked about this instance with Finance Magnates agreed with the World Bank Financial Inclusion Index’s metrics: almost 45% of the population in LatAm was unbanked until 2017.
As of January 2020, only 342 million adults in the region have a bank account, an average of only 55%, which is not far from the statistics collected in 2017.
Speaking with Finance Magnates, Eduardo Delgado, Director at Fintexify, highlighted that Latin America has a total population of 622 million, making it one of the regions in the world with the most people lacking access to banking or finance services.
The numbers unveil high inequal access to the banking system compared to other regions like the United States and Western Europe, where the numbers are much less. For example, Andrew Latham, Certified Financial Planner (CFP) and the Managing Editor of SuperMoney.com, told Finance Magnates that only 5% or less of Western Europe and North America residents are unbanked.
But, what are the main challenges for the Latin American countries to address this issue? Latham talks about it: “The main challenge for many Latin American countries is providing access to banking services to low-income families living in isolated areas with little to no access to physical branches of banking institutions. However, 75% of Latin America has access to a smartphone, so there are huge opportunities for online banking. The key is to provide free or very low-cost checking accounts with low minimum initial deposits and reasonable fees so that banking is affordable for low-income families.”
In this sense, Latham noted that the challenges are very similar to the obstacles to unbanked households on the US front. He quoted an FDIC report, noting that the most common reason households don’t have a checking account in the United States is they do not have enough money to meet minimum balance requirements.
Covid-19 Impact on Unbanked Population
But the Covid-19 pandemic significantly impacted the metrics of the unbanked population across Latin America. Statista’s numbers unveiled that Brazil had the largest change regarding unbanked people, decreasing by 73%. Colombia and Argentina experienced a reduction of 8% and 18%, respectively, according to Statista.
In the case of Brazil, the Brazilian government designed the ‘coronavoucher’ program as a response to Covid-19, an emergency subsidy distributed by the state-owned bank Caixa Econômica Federal (CEF). As a result, the coronavoucher program That said, 66 million people have received the subsidy by August 5, 2021, 36 million of whom were previously unbanked.
As well, the Colombian government has created the Ingreso Solidario so that families can cope with Covid-19. Over 3 million families are assisted by the program, representing approximately 19% of the population. For the unbanked 1.5 million Colombians, the program used digital wallets Daviplata, Nequi, and Movii, first sending funds directly to their bank accounts.
The Argentine government established Emergency Family Income, to be deposited into bank accounts or redeemed at ATMs, post offices, and retail stores for cash.
Delgado proposed some solutions to fix this gap in Latin America: “The way to fix this gap is by building financial inclusion, which means removing barriers like high fees and restrictions, increasing product and service value, and expanding digital and financial education.”
Furthermore, he dives deep into the fintech companies, and how they could play a critical role in bolstering this front. “Fintech companies have realized the huge opportunity this represents in LatAm. There has been a rapid growth from 2015 to 2020 and then even more in 2021, when Latin American fintechs raised $138 million and $3.14 billion, respectively, in 2015 and 2020, and then this number skyrocketed in 2021,” Delgado noted.
He added that online banks, fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to supply a technological service that not only simplifies but also aids consumers, business operators, and networks.This is done by optimizing business processes and financial operations through the implementation of specialized software, algorithms, and automated computing processes. Transitioning from the roots of the financial sector, fintech providers can be found through a multitude of industries such as retail banking, education, cryptocurrencies, insurance, nonprofit, and more. While fintechs cover a vast array of business sectors, it can be broken down into four classifications which are as followed: Business-to-business for banks, Business-to-business for banking business clients, business-to-consumers for small businesses, and consumers. More recently, fintechs presence has become increasingly apparent within the trading sector, primarily for cryptocurrencies and blockchain technology.The creation and use of Bitcoin can also be contributed to innovations brought upon by fintechs while smart contracts through blockchain technology have simplified and automated contracts between buyers and sellers. As a whole, fintechs applications are growing more diverse with a consumer-centric focus while its applications continue to innovate the trading and cryptocurrency sectors through automated technologies and business practices. Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to supply a technological service that not only simplifies but also aids consumers, business operators, and networks.This is done by optimizing business processes and financial operations through the implementation of specialized software, algorithms, and automated computing processes. Transitioning from the roots of the financial sector, fintech providers can be found through a multitude of industries such as retail banking, education, cryptocurrencies, insurance, nonprofit, and more. While fintechs cover a vast array of business sectors, it can be broken down into four classifications which are as followed: Business-to-business for banks, Business-to-business for banking business clients, business-to-consumers for small businesses, and consumers. More recently, fintechs presence has become increasingly apparent within the trading sector, primarily for cryptocurrencies and blockchain technology.The creation and use of Bitcoin can also be contributed to innovations brought upon by fintechs while smart contracts through blockchain technology have simplified and automated contracts between buyers and sellers. As a whole, fintechs applications are growing more diverse with a consumer-centric focus while its applications continue to innovate the trading and cryptocurrency sectors through automated technologies and business practices. Read this Term companies in general and cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. Read this Term will play an ‘important role in allowing the unbanked in LatAm to get access to financial services.’ “The companies that are able to position themselves well will reap big gains in the next years,” Delgado highlighted.
The banking sector in Latin America has been booming in the last few years, although the experts who talked about this instance with Finance Magnates agreed with the World Bank Financial Inclusion Index’s metrics: almost 45% of the population in LatAm was unbanked until 2017.
As of January 2020, only 342 million adults in the region have a bank account, an average of only 55%, which is not far from the statistics collected in 2017.
Speaking with Finance Magnates, Eduardo Delgado, Director at Fintexify, highlighted that Latin America has a total population of 622 million, making it one of the regions in the world with the most people lacking access to banking or finance services.
The numbers unveil high inequal access to the banking system compared to other regions like the United States and Western Europe, where the numbers are much less. For example, Andrew Latham, Certified Financial Planner (CFP) and the Managing Editor of SuperMoney.com, told Finance Magnates that only 5% or less of Western Europe and North America residents are unbanked.
But, what are the main challenges for the Latin American countries to address this issue? Latham talks about it: “The main challenge for many Latin American countries is providing access to banking services to low-income families living in isolated areas with little to no access to physical branches of banking institutions. However, 75% of Latin America has access to a smartphone, so there are huge opportunities for online banking. The key is to provide free or very low-cost checking accounts with low minimum initial deposits and reasonable fees so that banking is affordable for low-income families.”
In this sense, Latham noted that the challenges are very similar to the obstacles to unbanked households on the US front. He quoted an FDIC report, noting that the most common reason households don’t have a checking account in the United States is they do not have enough money to meet minimum balance requirements.
Covid-19 Impact on Unbanked Population
But the Covid-19 pandemic significantly impacted the metrics of the unbanked population across Latin America. Statista’s numbers unveiled that Brazil had the largest change regarding unbanked people, decreasing by 73%. Colombia and Argentina experienced a reduction of 8% and 18%, respectively, according to Statista.
In the case of Brazil, the Brazilian government designed the ‘coronavoucher’ program as a response to Covid-19, an emergency subsidy distributed by the state-owned bank Caixa Econômica Federal (CEF). As a result, the coronavoucher program That said, 66 million people have received the subsidy by August 5, 2021, 36 million of whom were previously unbanked.
As well, the Colombian government has created the Ingreso Solidario so that families can cope with Covid-19. Over 3 million families are assisted by the program, representing approximately 19% of the population. For the unbanked 1.5 million Colombians, the program used digital wallets Daviplata, Nequi, and Movii, first sending funds directly to their bank accounts.
The Argentine government established Emergency Family Income, to be deposited into bank accounts or redeemed at ATMs, post offices, and retail stores for cash.
Delgado proposed some solutions to fix this gap in Latin America: “The way to fix this gap is by building financial inclusion, which means removing barriers like high fees and restrictions, increasing product and service value, and expanding digital and financial education.”
Furthermore, he dives deep into the fintech companies, and how they could play a critical role in bolstering this front. “Fintech companies have realized the huge opportunity this represents in LatAm. There has been a rapid growth from 2015 to 2020 and then even more in 2021, when Latin American fintechs raised $138 million and $3.14 billion, respectively, in 2015 and 2020, and then this number skyrocketed in 2021,” Delgado noted.
He added that online banks, fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to supply a technological service that not only simplifies but also aids consumers, business operators, and networks.This is done by optimizing business processes and financial operations through the implementation of specialized software, algorithms, and automated computing processes. Transitioning from the roots of the financial sector, fintech providers can be found through a multitude of industries such as retail banking, education, cryptocurrencies, insurance, nonprofit, and more. While fintechs cover a vast array of business sectors, it can be broken down into four classifications which are as followed: Business-to-business for banks, Business-to-business for banking business clients, business-to-consumers for small businesses, and consumers. More recently, fintechs presence has become increasingly apparent within the trading sector, primarily for cryptocurrencies and blockchain technology.The creation and use of Bitcoin can also be contributed to innovations brought upon by fintechs while smart contracts through blockchain technology have simplified and automated contracts between buyers and sellers. As a whole, fintechs applications are growing more diverse with a consumer-centric focus while its applications continue to innovate the trading and cryptocurrency sectors through automated technologies and business practices. Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to supply a technological service that not only simplifies but also aids consumers, business operators, and networks.This is done by optimizing business processes and financial operations through the implementation of specialized software, algorithms, and automated computing processes. Transitioning from the roots of the financial sector, fintech providers can be found through a multitude of industries such as retail banking, education, cryptocurrencies, insurance, nonprofit, and more. While fintechs cover a vast array of business sectors, it can be broken down into four classifications which are as followed: Business-to-business for banks, Business-to-business for banking business clients, business-to-consumers for small businesses, and consumers. More recently, fintechs presence has become increasingly apparent within the trading sector, primarily for cryptocurrencies and blockchain technology.The creation and use of Bitcoin can also be contributed to innovations brought upon by fintechs while smart contracts through blockchain technology have simplified and automated contracts between buyers and sellers. As a whole, fintechs applications are growing more diverse with a consumer-centric focus while its applications continue to innovate the trading and cryptocurrency sectors through automated technologies and business practices. Read this Term companies in general and cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. Read this Term will play an ‘important role in allowing the unbanked in LatAm to get access to financial services.’ “The companies that are able to position themselves well will reap big gains in the next years,” Delgado highlighted.