The social and economic consequences caused by Covid-19, left as a result problems as diverse and serious as the logistics crisis, the scarcity of raw materials, and the lack of energy, food, and semiconductors. This, added to the war in Russia and Ukraine, has caused an inflation of 8.6% in the United States, one of the most stable economies in the world. Being this index one of the highest peaks that this country has reached in the last 40 years and that in one way or another will impact the different markets of Latin America.
(‘Fintech’ will raise financial inclusion figures for 2021).
These facts especially affect LATAM companies and startups, who depend on market stability to be able to sell and maintain their economic stability. While the fall in the most important stock indices such as el Dow Jones, the S&P 500 and the Nasdaq, or the impacts that funds of the stature of Softbank and Tiger Global Management have hadslowed down foreign investment and made raising equity (investment) more difficult and costly.
For this reason, fintechs are gaining more and more ground today, since they have diversified business solutions in debt and liquidity, which entrepreneurs can turn to regardless of their size and need.
Even according to the latest estimate from the Cambridge Center for Alternative Finance (CCAF), the total volume of money generated by alternative finance platforms was USD 113 billion worldwide. This volume was estimated from the resources obtained by digital financial services platforms that were delivered to individuals, businesses and other fundraising organizations..
For the economist Pablo Santos, who is the founder of Finaktiva, one of the most recognized fintech companies in the Latin American business environment, he assures that companies must be efficient with the use of the capital they have, strategic in the market and will have to find new methods financing.
(Credit demand drives lending fintech).
“Therefore, entrepreneurs should put aside, at least this year, that desire to obtain capital through equity, and see debt as a financial solution in the current scenario to have greater liquidity and respond to obligations. There, fintech will be one of the best mechanisms to diversify the liquidity they require because they are faster, more agile and facilitate the needs of companies vs. traditional banking Santos added.
And it is that the ecosystem of Latin American fintechs is one of the most relevant in the world, since they represent a quarter of the organizations of this type that currently exist. This, taking into account that in less than four years, these companies grew by 112%, after going from being only 297 in 2018 to closing 2021 with 2,482according to the latest report published by the Inter-American Development Bank, IDB Invest and Finnovista.
Pablo Santos explains that although these figures are encouraging, it is a time when the development and creation of startups of this type will also be stopped, for a stage of market consolidation, in which they must offer greater value and, show that they really are a solution for people and companies right now.
In addition, he rescued the work that fintechs such as Jeeves, Tribal or Clara have been developing, offering corporate credit cards for companies and SMEs; or from Mexican startups such as Konfío that have specialized in their markets in granting loans to small and medium-sized companies with a short approval period.
“To this, it is essential to highlight that the financing lines that we manage from Finaktiva such as Credito Mujeres, business + SUAM or tailored SMEs, will be necessary in these times for those companies that are in a growth stage and require constant liquidity, while that Factoring and Confirming will benefit medium and large companies”, added the CEO of this fintech.
In the midst of this situation, it should be noted that the increase in interest rates by central banks will also mean less growth in the granting of loans and a weaker quality by these financial entities, during this year. In turn, this will determine greater pressure for fintechs, which must be more competitive and better providers in the face of current needs.
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