VC funding surged in Latin America last year, led by Brazilian fintech startups. Brazil has seen a wave of investment into fintech due to an ongoing scaling of open banking in the country, allowing third party startups to optimize financial service offerings by leveraging troves of data from the traditional banking system.
Many of the country’s fintech startups are now expected to follow in the footsteps of Berkshire-backed Nubank, a Brazilian fintech firm that raised billions in venture funding and capped the fifth-largest US listing last year. Brazil is facing a slowing economy in 2022, but the rise of digital banking, lending, and insurtech is likely to revolutionize the country’s financial sector.
Related ETF & Stocks: Global X FinTech ETF (FINX), iShares MSCI Brazil ETF (EWZ), Nu Holdings Ltd. (NU)
Startups in Latin America attracted $15.3 billion last year, more than triple the previous record of $4.9 billion in 2019, according to preliminary data released Sunday by the Association for Private Capital Investments in Latin America (LAVCA). Bloomberg notes funding in every major country hit a record, led by Brazil, and the financial technology (fintech) sector.
Fintech has been especially popular in Brazil due to the introduction of open banking reforms in the country, which recently entered their fourth and final phase. Per Investopedia, Open banking refers to granting third-party financial service providers (typically tech startups) open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs).
Ultimately, open banking will create a more data-intensive and profitable ecosystem for fintech companies, forcing large, established banks to be more competitive with smaller and newer banks. Ideally, that will also mean lower costs, better technology, and better customer service for consumers.
In the latest stage of the open banking rollout, Brazil marks its shift into “open finance”. This is when the entire financial footprint of individuals with data such as mortgages, savings, pensions, insurance, and credit can be opened up to trusted third-party APIs upon consumer consent.
Brazilian lender Creditas announced today that it has raised $260 million in a Series F funding that values the company at $4.8 billion. That’s up from the fintech’s $1.75 billion valuation at the time of its $255 million raise in December 2020. Creditas specializes in selling a range of secured loans, using homes, vehicles and even iPhones as collateral, thereby offering cheaper rates than traditional banks.
TechCrunch notes the São Paulo-based firm has now raised more than $829 million in funding over six rounds. As of Q3 2021, the company reported its credit portfolio under management had reached $532 million — up from $189.3 million in the third quarter of 2020.
Dock, a Brazilian fintech backed by Visa Inc., powers more than 40.9 million active accounts and roughly $50 billion in annual payment volume across Latin America through its cloud-based platform. Bloomberg notes that…
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