Latin America is a region where some hesitate to expand to, whether it be because of red-tape woes or the uncertainty of the economy. But there are some businesses overcoming their apprehension and going all-in on their investments in Latin America.
One industry, in particular, where there has been an outpour of return on investments in Latin America is in Fintech. Companies like SoftBank are catching on and have poured millions of dollars in investments across several startups in the industry.
Before we dive into the details of investments by SoftBank in Latin America, here is a quick overview of what Fintech is:
What is Fintech?
Fintech is an abbreviation of the niche sector, financial technology. Fintech is an industry that includes any form of technology used to conduct financial services, especially between businesses and consumers. Simply put, it is the movement of money through technology.
Examples of Fintech:
- Mobile payment apps (Cashapp, Venmo, Zell)
- International money transfers (Transferwise, Paypal)
- Cryptocurrency (Bitcoin)
- Crowdfunding platforms (GoFundMe, Kickstarter)
Where Did The Rise Of Fintech Come From?
When the market crashed in 2008, the relationship between major banks and people soured. They felt that banks allowed customers to go into debt without being there to aid them when the crash happened. It left millions jobless and even more with a shaky feeling.
This distrust of banks created the perfect segway into Fintech. It came to the rescue because it gave customers a better experience with money. Why?
- Cell phones were everywhere, which bred financial convenience. Tech could go where banks couldn’t.
- The personalization of Fintech made it more attractive to consumers –financial services not only helped people manage their money but also adapted to a person’s needs. (Travel, investing, money exchange.)
- The honesty and transparency of what was happening with their money drew consumers closer to adopting Fintech services.
These principles lured the usual skeptic Latin American consumer in masses, which is why companies like SoftBank have been breaking the bank to break into the Fintech industry in Latin America.
Who Is SoftBank?
Softbank, AKA SoftBank Group Corp, is a Japanese multinational conglomerate holding company headquartered in Tokyo.
They have been using the world as it’s investment playground and zero in on regions where they see an economic boom on the horizon. In the past, they have invested in companies like Uber ($7.7 billion) and Slack ($335 million).
SoftBank Investment in Latin America
SoftBank’s Innovation Fund has pledged to invest $5 billion into Latin America and is focusing on fintech and e-commerce. Let’s look at where all this money is going.
SoftBank is looking to invest in about 300 companies in Latin America, and 200 of them are in Brazil. The company sees enormous economic potential in the country.
“We already feel that the opportunity in the region is bigger than what we originally thought.”Andre Maciel, managing partner of SoftBank’s Innovation Fund, said.
For example, SoftBank invested $231 million to Creditas, a Brazilian fintech company that offers secure loans.
QuintoAndar, another growing business, allows landlords to advertise and rent out their properties and helps tenants find a place to live. It conducts credit checks on potential renters and guarantees rent for the landlord no matter what the tenant has paid. SoftBank and other groups invested $250 million into this real estate tech startup.
Not to mention the roughly $140 million SoftBank invested into VTEX, a Brazilian e-commerce platform that has worked with companies like Walmart and Motorola.
Overall, Brazil is a hotbed of investment for SoftBank and many other companies.
In Mexico, a SoftBank-led investor group has decided to invest $125 million in AlphaCredit. This Mexican based fintech company provides credit lines to small business owners in Mexico and Colombia. So far, they have granted over $1 million in loans.
Another fintech company, Clip, that makes mobile credit card readers for smartphones, also received a $20 million investment from SoftBank. Their product and service are handy for small businesses like street vendors to accept credit cards and not just cash.
Fintech in Colombia is thriving, boasting the third-largest fintech ecosystem in LATAM. SoftBank saw that success and decided to invest in Colombia.
Rappi is a delivery service where people can order things like food, groceries, and medications. SoftBank poured $1 billion into the app, and Rappi now has about 10 million active monthly users and has expanded into eight LATAM countries.
Meanwhile, in Argentina, SoftBank and Tencent invested $150 million in fintech startup Ualá. It is a personal finance app that is linked to a prepaid MasterCard. Users can make payments and purchases, transfer money, and see how they spend their money.
Why is this Important?
Financial technology startups are on the rise. SoftBank is looking to invest in ventures and startups that look the most promising, and Latin America is a region with limitless economic capabilities and untapped opportunities.
“Latin America is on the cusp of becoming one of the most important economic regions in the world, and we anticipate significant growth in the decades ahead.”Masayoshi Son, CEO of SoftBank
Ride the LATAM Fintech Wave
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