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Unlocking the Potential of Fintech Partnerships in Latin America and the Caribbean

Writer's picture: Anthony OrbanicAnthony Orbanic

What Does Success for Partnerships Look Like Amidst Risk in the World’s Hottest Fintech Market?


As we enter 2025, fintech partnerships worldwide are creating dynamic financial services ecosystems. Driven by changing technological dynamics and buoyed by significant customer opportunities, the fintech market—particularly in Latin America and the Caribbean (LAC)—strives for rapid transformation into a world-class financial ecosystem serving over 660 million people. However, this transformation does not come without challenges, particularly in compliance and regulatory innovation.


The Inter-American Development Bank (IADB) estimates that nearly a quarter of all fintech platforms worldwide are situated in Latin America and the Caribbean. Many fintech companies in the region focus on serving markets that have traditionally lacked access to banking and financial services. These companies have achieved rapid advancements not only in mobile payments and banking but also in asset management, digital lending, cryptocurrencies, alternative finance, insurtech, and other market segments. In 2023, fintech in the region reportedly served over 427 million people, according to Statista.


The IADB projected that registered entities in the LAC region increased from slightly over 700 in 2017 to more than 3,000 in 2023—a 340% gain for the fintech sector. Additionally, 60% of fintech companies in the region are primarily focused on payments, lending, and financial enterprise solutions. Registrations for entities specializing in digital banking, cryptocurrencies, and insurance also saw significant growth between 2021 and 2023.


Amidst this rapid innovation and market development, partnerships between fintechs and financial service organizations (FSOs), compliance professionals, and risk management teams face numerous risks. Political and economic instability remains a persistent concern among stakeholders. Regulatory gaps, along with insufficient supervision and enforcement mechanisms across jurisdictions, present pressing challenges. Furthermore, risks related to illicit finance, cybersecurity, artificial intelligence, and financial solvency continue to threaten the sector. Above all, it remains unclear what effective best practices will be necessary for these partnerships to thrive.


DID YOU KNOW?


During the COVID-19 pandemic, the World Bank identified that financial regulators in emerging markets prioritized fintech regulation more than their counterparts in developed economies.


The Secret of Effective Partnerships: Realistic Expectations


For fintech partnerships in the region to succeed, stakeholders must establish effective and realistic expectations. However, creating those expectations can be challenging due to the slow and complex regulatory environment and a market that has grown too large, too quickly.


Fintech companies, FSOs, and financial regulators in the region face inadequate or nonexistent regulatory frameworks, hindering market development. The rapid pace of innovation in the fintech sector has far outpaced the regulatory and supervisory mechanisms in place.


One contributing factor to regulatory complexity in the LAC fintech industry is the variation in regulatory interpretation across jurisdictions. Different countries in the region interpret regulations differently, creating ambiguity and confusion. Regulations and supervision are often defined by the firm's overall activities rather than the specific services it provides.


For example, Mexico is the only jurisdiction in the region with a comprehensive, entity-based regulatory framework for fintech, granting licenses specifically for fintech firms. Meanwhile, countries like Argentina, Brazil, and Colombia have adapted existing regulations to govern specific activities such as credit, payments, alternative finance, and crowdfunding. These measures enable partnerships with larger institutions.


The lack of compatible cross-border regulations exacerbates other challenges that could jeopardize partnerships. For example, while fintechs are partnering with larger financial institutions, third-party risks and data protection/privacy concerns remain critical. Fintech providers offering cryptocurrency wallet or correspondent banking services must also contend with additional money laundering and Know Your Customer (KYC) requirements, which can lead to interoperability issues.


To their credit, regulators have adopted new approaches during and after the COVID-19 pandemic, such as innovation hubs and regulatory sandboxes. These mechanisms have enabled quicker and more effective supervision. However, many stakeholders still regard fintech regulation as insufficient, and dialogue between the fintech community and regulators remains limited, increasing systemic risk.


DID YOU KNOW?


According to the Inter-American Development Bank, 59% of financial regulators in the LAC region have a section dedicated to financial innovation.



What Should Successful Practitioners Do? Communicate and Focus on the Basics


Despite the risks, the LAC region's fintech market presents ample opportunities for practitioners. Success in the region requires active communication, focusing on the fundamentals, and adopting a problem-solving mindset.


Key Considerations:


  1. Adapt to Local Market Conditions: Understanding local geography and consumer habits is essential. For instance, Banking as a Service (BaaS) and blockchain may succeed in the Caribbean, while mobile payments and remittances dominate in Mexico, and small-to-medium-sized business banking thrives in Colombia.


  2. Bridge Regulatory and Capital Gaps: A major driver of fintech in the LAC region is the high cost of capital and the lack of funding for both fintechs and regulators. Most fintech companies rely on venture capital and private equity. Practitioners who can navigate regulatory ambiguity while fostering sustainable funding opportunities will gain a competitive edge.


  3. Ask the Right Questions: During the partnership-building phase, stakeholders should focus on detailed and transparent communication. Key questions include:

    • What risks will the partnership produce, and how will they be assessed?

    • Are the risks manageable and aligned with strategic objectives?

    • What will integration entail in terms of time, cost, and logistics?

    • How will the partnership deliver value?

    • Is customer data and privacy secure?


It Takes a Digital Village


Technology forms the backbone of fintech in the LAC region and serves as a critical tool for collaboration and communication. Stakeholders across regulatory, private, and technological domains must leverage technology to foster dialogue, transparency, and trust.


Building effective compliance and risk management structures hinges on meaningful engagement and listening to both partners and customers. While a "one-size-fits-all" solution is unrealistic, the digital transformation of financial systems in the LAC region resembles a digital village, evolving through collaboration and shared growth. Stakeholders must embrace this journey with open, transparent dialogue to ensure success.


To unlock the full potential of fintech partnerships in Latin America and the Caribbean, industry leaders, regulators, and innovators must come together to bridge gaps, foster dialogue, and build trust. Whether you're a fintech pioneer, compliance expert, or regulatory leader, your collaboration is vital to shaping a thriving, inclusive, and secure financial ecosystem.


Kick off the conversation with experts by attending the Fintech Financial Crime Prevention Forum on January 16 in Miami. Our LATAM panel will dive deep into these trends, challenges, and opportunities—don’t miss the chance to shape the future of fintech in the region.




Meet The Author - Anthony Orbanic

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