The Caribbean region boasts a population of approximately 45 million people. For context, that is significantly larger than Canada’s 38 million and just shy of Spain’s 47 million. However, about two-thirds of Caribbean citizens are unbanked, meaning they are predominantly cash-based. Thus it is critical to the region’s economic future to introduce innovative financial solutions that help overcome cultural and historical barriers to transition from legacy methods and spur the adoption of digital tools.
According to The World Bank Group’s 2021 Global Findex Report, financial services such as payments, savings accounts, and credit are a cornerstone of development. Accounts – whether they are with a bank or regulated institution such as a credit union, microfinance institution, or a mobile money service provider – allow their owners to safely and affordably store, send, and receive money for everyday needs. Additionally, they enable individuals to plan for emergencies and make productive investments for the future, such as in health, education, and businesses. In contrast, individuals without access to an account must rely on informal mechanisms, such as cash, that may be less safe, less reliable, and more expensive than formal financial methods.
The COVID-19 pandemic exposed the vulnerability of those without digital access to financial services – even if they are banked – while also serving as a catalyst for growth in the use of digital financial services for all citizens. The popularity of digital payments expanded globally during the pandemic, driven by a decline in cash payments and growth in e-commerce that helped drive broader expansion of digital banking.
A new wave of digital-first banking solutions are now providing innovative ways for previously underbanked consumers across LATAM and the Caribbean to access financial services – and for more efficient online access for those already banked.
The Oxford Business Group reports that the number of fintech platforms across Latin America and the Caribbean grew from 703 in 2017 to 2,482 in 2021, or 22.6% of the global total. Brazil accounted for 31% of all platforms in the region, followed by Mexico (21%), Colombia (11%), Argentina (11%) and Chile (7%). Nubank’s disruption of the traditional banking sector in Brazil is particularly notable given the sector’s traditional concentration: five large traditional banks managed 84% of the country’s loans and 90% of retail banking branches in 2019. This is reflective of a larger trend in the region, with neobank challengers also spurring incumbents to adopt digital-first approaches.
While digital banking in the Caribbean has not seen the pace of growth experienced in Latin America – perhaps more of an “evolution” than a “revolution” – there are notable success stories that indicate the potential for more startups to enter the space.
One such example is WiPay. Founded in Trinidad and Tobago, WiPay offers a range of digital payments solutions. After relocating to Jamaica in 2021, the company founded neobank Color Bank, serving the Caribbean and African diaspora population in the US.
Traditional financial institutions are stepping up as well. Interestingly, to help meet customers where they are and provide a more seamless introduction to digital banking, ANSA Bank has launched several “digital touchpoints” in Trinidad. These vibrant and meticulously designed non-traditional branches include meeting rooms for in-person customer service alongside a QR code-scannable augmented reality wall.
Moreover, financial institutions are increasingly partnering with fintechs to power digital-first banking. In May 2023, Sagicor Bank Barbados, the first fully digital bank in the English-speaking Caribbean, launched on Banking-as-a-Service (BaaS) platform provided by the US-based fintech company Mbanq.
What new and innovative startups will emerge in the region to provide more inclusive and efficient access to banking services? How will the incumbents respond? And what fintech infrastructure providers will partner to power the next wave of solutions?
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