What is the impact of startups? She has on the world? Often, a heck of a lot. And when a group of startups work on a similar set of problems, they often lead to massive shifts in how everyday life is lived. In the case of access to financial services in Latin America, new data suggests that startups have had a significant and measurable impact.
As the global venture capital market shrinks, startups in Latin America have raised far less than they once did compared to other markets tracked by TechCrunch. This is by no means a new trend, but the numbers are stark now that we’re more than halfway through 2023.
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new Atlantico report It notes that venture capital volumes (measured in billions of dollars) in Latin America fell by 65% in the second quarter of 2023 compared to the previous year. It is worth noting that this indicates that investment in financial technology, the category that has historically attracted the largest amount of capital in the region, has also declined in the region.
It’s obviously not encouraging that startups in Latin America are facing a severe lack of funding compared to other markets at the moment – not all the news there is bad, it’s worth noting – but looking only at the bad news at the moment means we’re effectively ignoring how much… The impact of startups in the region. In particular, we are talking about impact investing in startups, fintech and consumer finance in Latin America.
In Latin America, fintech has long been a sector that startups love to engage with. It is not difficult to understand why: the region was, and still is, significantly underbanked compared to many other major countries. In its report, Atlantico compares Latin America with India and the United States, noting that from 2011 to 2017, bank account penetration in Latin America rose from 39% to 55%. In contrast, India saw penetration rise significantly from 35% to 80% in the same period, while the United States achieved a more modest increase of 88% to 93%.
Things look different after 2017. Bank account penetration rose from 55% in Latin America to 74%, while in India it fell from 80% to 78%.
No national statistic is affected by a single factor, so we do not want to overstate this situation. But, given the number of fintech startups that raised money (and the amounts of money that investors pumped into the sector) in Latin America during the recent venture boom, it is not difficult to correlate the rapid improvement in bank account penetration with startup activity during the same period. All that capital has had a real impact.