Thiago is a fintech entrepreneur, investor, and columnist.
He is currently a product leader at Oyster, a neobank for SMEs in Latin America.More posts by this contributorAlthough the 2008 global financial crisis sparked the fintech movement, in Latin America, the rise of ecommerce was responsible for the first wave of fintech startups.Because digital payments were key to enabling the growth of ecommerce, investors funded companies like Braspag, PagSeguro, PayU, Mercado Pago and Moip in the early 2000s to take advantage of this opportunity.Payment is still the most relevant segment, with successful cases like Stone and PagSeguro, but after the financial crisis, we started to see the rise of financial technology in lending and neobanking, generating impressive cases like Nubank, Neon, Creditas, Credijusto and Ual.As the ecosystem evolves and expands, lets take a closer look at emerging trends in Latin America that might give us a hint about where to expect its next fintech unicorns.Financial services for the gig economyLatin America has seen explosive growth in ride-hailing and food delivery platforms such as Uber, Didi, Rappi and iFood, creating a totally new market opportunity many gig economy workers cant access basic financial services such as bank accounts, personal loans and insurance.
Even those who have access often struggle with financial products that that dont suit their needs because they were designed for full-time workers.Spotting this opportunity, Uber Money launched at Money 2020, focusing on providing drivers with financial services.
As 50% of the population in Latin America is unbanked where Uber has more than 1 million drivers, the region is definitely a ripe market.
Cabify is going even farther by spinning off Lana, its company that provides financial services, so it can expand its market beyond Cabify drivers to include other gig economy professionals.Although established players in this sector have a clear advantage, they arent the only ones looking to explore this opportunity; Brazilian YC alumni Zippi is offering personal loans to ride-hailing drivers based on their driving earnings.
As the gig economy tends to keep growing in the region, I believe we will start to see more solutions for those professionals.Rethinking insuranceAs the banking world has been shaken by fintechs, insurance companies are growing aware that high regulatory barriers wont protect their industry from disruption.Insurance penetration in Latin America has been historically low compared to developed markets 3.1%, compared to 8% but the insurance market is growing well and tends to close this gap.
Adding this to bad services and complex products that insurances provide, insurtech has an immense opportunity to grow.Because purchasing insurance is historically a complicated and painful experience, the first insurtechs in the region focused on providing a better experience by digitizing the process and using online channels to acquire customers.
Those insurtechs worked together with the insurance companies and operating as online broker, but now, were starting to see startups providing new insurance products, as well as traditional insurances in different models.Some are partnering with insurance companies while others are competing directly with them; Think Seg and Miituo partnered with larger players to provide a pay-as-you-go model for car insurance, while Mango Life and Kakau are offering a better purchasing experience.
On the other end, Crabi and Pier are rethinking the insurance model from the ground up.As insurtechs emerge as a potential threat, incumbents are more willing to work with startups that can improve their services to enable them to compete on better grounds, which is exactly what companies such as Bdeo, Lisa, and HelloZum are doing.Although penetrating the insurance industry is more complicated than other financial services due to high regulatory demands and steep initial operating costs, insurtechs fueled by VC investment will without any doubt try to do it.
And, if weve learned anything from other fintech segments, its that entrepreneurs will find ways to overcome initial challenges.