What is a fintech, how does it work, and why does it matter?

The Fintech sector has been booming in Latin America, driving innovation and inclusion from many angles. In this article, we’ll break down what Fintech is and everything you should know about its impact on the ecosystem.

Fintech comes from blending “Finance” and “Technology,” and it refers to the industry focused on improving financial services through tech-based solutions. So, a Fintech is essentially a company that uses technology to create, deliver, or enhance a financial service.

The Fintech ecosystem has seen explosive growth worldwide, and Latin America is no exception. Today, different markets across the region have developed or actively use tech-driven financial products, reshaping user behavior and unlocking new possibilities.

From mobile banking to investment apps, Fintech solutions cover a wide range of use cases. And it’s not just about improving experiences for end-users—many of these innovations are also transforming internal processes within banks and other traditional institutions.

According to the Inter-American Development Bank (IDB), by the end of 2021, Latin America had more than 2,480 Fintech companies. That number already marked a 112% growth compared to 2018, making the region home to 22.6% of the world’s Fintechs.

The countries leading the way are Brazil, Mexico, and Colombia, with roughly 770, 512, and 279 Fintechs, respectively.

Finnovista data shows that the top categories in the region are:

• Payments and Remittances (23%)
• Lending (18%)
• Enterprise Tech for Financial Institutions (14%)

When it comes to investment, Fintech has taken center stage. According to Forbes, in 2021, it was the sector that received the highest amount of venture capital funding, attracting 39% of all VC investment in the region.

Fintechs have reimagined the financial industry by making access to services more flexible and less dependent on traditional banks. They’ve introduced new alternatives and enhanced existing systems, making financial services simpler, faster, and more user-friendly.

Because they operate in the digital space, Fintechs typically offer their services through mobile apps, websites, or tech tools like software and APIs. This gives both individuals and businesses access to better financial products, smarter tools to manage their money, and more efficient ways to handle transactions.

As Fintechs grow in influence, many countries have realized the importance of supporting and regulating the sector. This has led to the creation of industry associations like Colombia Fintech, Fintech Mexico, FinteChile, the Argentine Fintech Chamber, and Uruguay’s Fintech Chamber, among others.

Pros:

• Financial Inclusion: Fintechs make it easier for people and businesses to access financial services, breaking away from the limits of traditional banking.
• Speed and Simplicity: Tech-driven processes mean faster, more secure, and more intuitive experiences.
• Lower Time and Costs: Gone are the days of endless paperwork and in-person appointments. Everything can be done digitally.
• Variety: With so many types of Fintechs, users now have more options than ever to meet their specific financial needs.

Cons:

• Lack of Regulation: While countries like Mexico, Chile, and Colombia have taken big steps forward, the legal framework across the region is still uneven, which creates uncertainty.
• Security Concerns: With inconsistent regulation, there’s no standard baseline for cybersecurity, leaving gaps that need to be addressed.
• Accessibility Gaps: Despite being inclusive in theory, many Fintechs still rely on internet access and devices—leaving out people in more vulnerable or remote communities.

The region is full of Fintechs that have made a real impact. Here are a few standouts:

Nubank: The largest neobank in the region, known for being the first to offer a 100% digital credit card with no maintenance fees or hidden clauses.

AlphaCredit: A Mexican Fintech specializing in SME financing. They offer both personal loans and working capital solutions for small businesses.

Bitso: A Mexican startup that offers crypto trading services and financial products based on digital currencies.

Prometeo: A Uruguayan Fintech focused on building tech infrastructure, especially bank APIs. With over 4 years in the market, Prometeo offers a single API that connects businesses to more than 1500 financial institutions across Latin America.

As a tech infrastructure provider, Prometeo helps Fintechs, traditional companies, and banks access vital banking data to improve their operations and streamline payments.

Our main products:

Bank Account Verification: We allow businesses to confirm whether a bank account is real and valid, crucial for payments and onboarding.
Account-to-Account Payments: Companies can receive real-time payments directly from their customers—no middlemen, just fast and affordable transfers.
Cash Management: We enable businesses to centralize all their bank accounts into a single, standardized format for faster, safer reconciliation. We also help them automate cash-outs, reducing losses caused by human error or forgetfulness.

If you want to learn more about Prometeo and how our APIs can power your business, get in touch—we’d love to build something great together.