Traditional banking has given way to neo-banks in Latin America, mainly in Brazil and Colombia

RIO DE JANEIRO, BRAZIL – Brazil and Colombia are the two Latin American countries where traditional banking has yielded the most to the offer of neo-banks. According to the XI Means of Payment Trends Report, both countries have the highest proportion of banked individuals who have opted for this option.

In both countries, just over 26% of banked individuals consider neo-banks as their main financial institution, a higher percentage than in Argentina (9.7%), Peru (3.5%), Chile (2%), Ecuador (1.8%), and Mexico (1.3%).

“Traditional banks are beginning to give way to new companies operating in the financial and payments sphere, especially the neo-banks,” according to the Minsait Payments report prepared in collaboration with Analistas Financieros Internacionales (AFI).

The report included the views of 225 executives and experts in the sector and 4,800 interviews with the banking population in Latin America, Spain, Italy, Portugal, and the United Kingdom.

According to the report, 61% of banked Colombians state that they operate or have contracted some financial product or service with neo-banks, while in Brazil, this percentage reaches 64%.

This boom “is explained not only by the large presence of this type of entities, but also by age, since it is the younger groups, both in Brazil and Colombia, who operate with neo-banks to a greater extent and identify them as their main financial allies”.

He adds that, although for most of the countries studied, the bank continues to be the entity with which most people operate, “other types of entities are increasing their presence, especially in Latin America, where telecommunications companies (through personal loans) or neo-banks are generating a new financial paradigm”.

Latin America reached a total of 1,524 institutions offering digital financial services in the categories of payments, insurance, loans, and investments in the first half of 2021, according to the report on the evolution of the fintech sector in Latin America released by Finnovista in conjunction with Mercado Pago.

It highlights the evolution of the fintech sector in the categories of paytech (payments fintech), insurtech (insurance fintech), lendingtech (lending fintech), and wealthtech (investment fintech).

“Coupled with the wave of investment in industry ventures, regulatory agencies have made efforts in different countries to establish innovative regulatory frameworks that contemplate the operation of new business models,” he stresses.

DETAILS FOR COLOMBIA

The XI Means of Payment Trends Report also indicates that Colombians are the ones who maintain the least lasting relationship with their main financial institution (6 years on average).

Meanwhile, it points out that 6 out of 10 are predisposed to operate with two or more financial entities (banks and neo-banks).

On the other hand, “the use of mobile payment apps between individuals continues to increase, and they are already used by 55% of the banked population” in Colombia.

Fifty-four percent of those who pay with mobile devices opt for the payment method directly from the app (inApp), while 46% do so from the QR reading method of the establishments themselves, while 38% pay through a QR or bar code generated on the mobile.

Despite the penetration of digital media, cash remained the primary payment method in Colombia in 2021.

In fact, 68% of Colombians said they had been forced to use cash in public transportation, followed by small and medium-sized businesses (66%) and professional services for the home (44%).

Concerning the banked population, 44% use cash daily, especially in small and medium-sized businesses and public transportation.

With information from Bloomberg Línea