In a region marked by the substantial Venezuelan diaspora, catering to financially excluded immigrants has become the core business of an increasing number of fintechs.
Over the past few years, several digital startups have made a case for offering financial services to underbanked immigrants, a customer segment often overlooked by traditional financial institutions. In Latin America alone, Venezuelans outside of their home country amount to over 6 million people.
Immigrants frequently encounter challenges when attempting to open bank accounts, let alone secure loans. According to Sergio Saravia, CEO of Argentinian remittance fintech Remitee, even in a well-developed banking system within Latin America, the industry’s focus on catering to this specific population is “virtually irrelevant.”
To be sure, there are many valid obstacles. First, immigrants often do not have a credit history. Nor do they have a steady source of income for banks to hang their hats on. They are thus perceived as bearing too much risk.
But the regional banking infrastructure is also not helpful, either.
“The most serious problems are the lack or little connection between banks and payment institutions in different countries,” said Saravia. “This makes it impossible to share customer information or have the same understanding of “Know your Customer” that is essential to providing financial services to unbanked people.”
In Colombia, banks do not allow foreign individuals to open bank accounts online. They must visit the branch. In the case of Venezuelans listed as refugees, their identification code can resemble that of a local ID, quite often creating an error within the banks’ system.
Fintech Uala grows an immigrant customer base in Colombia
Neobank Ualá is one of the most recent examples of fintechs serving the sector. Almost a quarter of its user base in Colombia comprises Venezuelan immigrants. The company argues that its digital-only systems are a competitive advantage in serving this segment.
“I don’t see many players who are opening products massively to this population, “Natalia Rios, general manager at Ualá Colombia, said to Fintech Nexus. “When you have legacy systems, sometimes it’s not that simple. We can adapt faster than some entities can.”
Following years of hyperinflation and economic collapse, many Venezuelans decided to leave. Right next door, Colombia is now home to 2.5 million immigrants, the largest community of Venezuelan ex-pats in Latin America.
While contributing to financial inclusion, it has only proved a juicy case for fintechs building a customer base. It is a niche that large lenders often overlook. “We do feel a responsibility to contribute to this population,” Rios said. “And, of course, this segment will later become very productive. The Venezuelan population is thriving and young; they have many entrepreneurs.”
Remittances are key for fintechs serving immigrants
For immigrant workers, remittances play a huge role. The massive financial inflows from the U.S. lights up many Central American economies, amounting to significant GDP growth in places such as Mexico. But its use has been growing in South America, too. Thousands of Venezuelans rely on these networks to send money back home. It has become a crucial service for gig economy workers.
“The traditional remittance system is costly and closed-looped,” Saravia told Fintech Nexus. A son of immigrant workers from Bolivia, Saravia founded Remitee in 2016. He lived firsthand the challenges of sending money cross-border and is confident that technology is finally providing a cheaper and faster way for ex-pats to move money around.
“Immigrants sending remittances usually put long hours to produce, for which time loss is very expensive,” he said. “How much time a delivery app worker spends in line is many times greater than the cost of sending that money.”
