Latin America is one of the hottest Fintech markets. Fintech deals and funding have grown considerably in recent years, despite political, social and environmental pressures in the region. With the current scenario, the “new normal”, what are the opportunities and challenges in the region? What about regulation in key markets such as Brazil, Chile, Colombia, Mexico and Peru? Are we expecting big changes for the industry players? What's next?

1. Fintech in Latin America: overview of local markets 

In a country with financial inclusion of only 55.6% in dispersed rural areas and 66.7% in rural areas, fintech companies have become allies of traditional banks to cover a larger territory with instruments that include financial services that do not need internet and work on so-called 'arrow cell phones’.

About 84% of Colombians have had access to some kind of financial product in their lives, but fintech industry leaders believe that only 30% of them use it regularly. That leaves many people in need of financial services, and fintech companies are changing the way the financial sector works in Colombia by offering products to people who have been left out by traditional banks.

According to a study released by Finnovation and the IDB, there is an annual growth of 26% in the Fintech ecosystem, which confirms the traction of Colombia and its consolidation as the third ecosystem in the region (after Brazil and Mexico), with a total of 200 fintech start-ups.

According to the EY 2019 Fintech Report, Colombia has the highest “fintech adoption” rate in Latin America, with 76% of its population using fintech services and the industry growing at about 120% a year.

2. Legal framework of fintech

Financial Statute

The main regulation in Colombia that covers financial activities, although it aims to be a comprehensive regulation, it does not cover most of the reality of Fintech. As such, new specific regulation on the topic has emerged.

“Companies specialized in electronic deposits and payments” or SEDPE (Law 1735 of 2014 and Decree 1491 of 2015)

Companies created to receive deposits from the public through electronic means. These companies cannot lend money, only receive deposits. This has been a major flaw for this figure, as it still must comply with some of the onerous requirements set for regular banks and financial institutions.

National Development Plan

Fintech companies may obtain a certificate to operate temporarily, with minimum capital, conditions and prudential requirements depending on the kind of fintech and operation. With this mechanism, businesses such as neobanks, digital insurers, crowdfunding platforms, SEDPEs or roboadvisors, which depend on profitability and scalability commitments, investment rounds and agile go-to-market strategies, will no longer have to wait for a lengthy and overloaded licensing process, but this certificate will allow them to operate temporarily in a two-year window and then obtain a full license.

Regulatory sandbox

Colombia also has the first regulatory “sandbox” in Latin America, a two-year arrangement that allows start-ups in the financial sector to experiment with business models without meeting all the requirements of a traditional financial services license, as long as they are under a regulator’s supervision. Decree 1234 of 2020 introduced a major announcement as the sandbox will also allow testing cryptocurrency operations in a controlled environment.


Crowdfunding companies (other than those dedicated to donations) will require authorization from the SFC and must comply with various requirements.

3. Effects of COVID-19

We do not have current data on how the ecosystem has grown or the exact effects of the pandemic on the industry. However, here are some things that allow us to conclude how the pandemic has strengthened the use of fintech in Colombia:

  1. Most fintech in Colombia can be classified into two types: “digital wallets” or mobile apps used for payments (pay for services, buy products and transfer money). These services have seen a surge in users during the pandemic, mostly because the government is using them to disperse large amounts of Covid-19 stimulus money and welfare payments.
  2. According to a study by Mastercard, contactless payments in Colombia have grown by 19%. The use of cash has been reduced to 62%. There is a surge of digital credit cards.
  3. Alliances between traditional banks and incumbents are growing and consumer perceptions of online banking are shifting
  4. The fintech ecosystem grows and becomes more relevant day by day. For instance, the government is using fintech to irrigate resources to vulnerable populations as part of its plan to counter the effects of COVID-19.

Despite this increase, there is still great challenge from the country's people who do not use banks and resistance to new payment models.

4. Opportunities and challenges of applicable regulations

As the ecosystem grows rapidly, there are several challenges and opportunities.


In Colombia, only 38% of adults over the age of 15 have a bank account, according to the World Bank. There is a significant portion of the population in Colombia that is not part of the traditional banking system, which leaves a great deal of opportunity for fintech start-ups. What sets Colombia’s fintech sector apart from other fintech hubs in Latin America is its focus not only on developing solutions for consumers who have been left out of the financial system, but also for small and medium-sized enterprises (SMEs). 45% of Colombian start-ups in the fintech sector are focusing on this segment.

The Colombian government supports the transition to digital financial solutions and is largely in charge of pushing the country towards cashless transactions.


There is a shortage of internet coverage, even though the government is trying to connect and grow in digital literacy.

Colombia’s financial sector is one of the most regulated in the world, mostly due to the country’s history of drug trafficking and money laundering. Banks must pay a hefty fee and qualify for hard-to-get licenses to receive deposits or donations from more than 20 people.

Another obstacle that discourages start-ups is a 0.4% tax on many financial transactions.

Other (both an opportunity and a challenge)

New investments: even venture capital for start-ups does not come in abundance, so they have challenges ahead in that direction, in specific regulation and administration. “Of the more than 90 private equity funds in the country, about 20 are actually venture capital and only two of them have invested in fintech. The 60 percent of the industry that goes out to look for financing has difficulties in the local environment and those that have succeeded have been abroad".

5. What's next?

Keep promoting a Fintech friendly environment and start experimenting with cryptocurrencies. Colombia is a great hub for Fintech and Neobanks are landing. New Fintech structures are also consolidating.