The challenges of Fintech in Chile

Chile is the second most attractive country in Latin America to Fintech investors, but the lack of regulation and venture capital has restricted its growth.

In Chile, Fintech companies have managed to raise 107 million dollars in capital, 57% of them have already exceeded the breakeven point, and 43% have started operations in other countries. These data are some of the insights offered by the “First Fintech Study in Chile: Challenges and Opportunities,” carried out by the consultancy EY and the Fintech Business Association of Chile (FinteChile).

94% of Fintech in Chile grew in the last year

Source: EY Chile & FinteChile

The study presents an overview of Chile’s digital financial services ecosystem based on four axes: Talent, Capital, Regulation, and Demand. Seventy of the more than 100 startups identified in this sector in Chile participated in the study.

The study shows the state of maturity of the sector. 94% of the startups surveyed reported having grown in the last year. However, they present challenges such as the need for regulation that supports their expansion and a more significant presence of venture capital, according to Ángel Sierra, Executive Officer of FinteChile.

Talent Deficit in Fintech

The difficulty of finding talent weighs on in the sector. 50% of the consulted fintech claims to have had problems finding the professionals they need in Chile, especially in technology.

Faced with this situation, 67% of fintech recruited the talent they need outside the country. For FinteChile and EY Chile, it is not enough to train students, but also teachers need to have an innovative vision to develop creativity in their students. Chile has several initiatives to improve its Education in technology.

The academy has the challenge of linking training with this changing reality, and fintechs must work to awaken interest and attract such talent.

Mauricio Martínez, executive director of EY Financial Services Consulting

Lack of investors for Chilean Fintech

Investors consider that Latin America is the second most attractive region to invest in Fintech, after the United States, while Chile is the second most desired market in LatAm, after Mexico. However, 71% of respondents believe that funding is lacking.

65% of the participating fintech declare to have raised capital, with a total amount amounting to $107M. 61% of fintech claim to have participated in some incubation or acceleration program.

“We have seen firsthand how investors have become interested in this new type of asset.”

Augusto Ruiz-Tagle, Cofounder of Destácame

Regarding government funds, 44% of the fintech surveyed consider support in digital financial services positive. For 61%, it is easy to access information about available funds. Also, 57% believe that it is easy to access state funds.

The most attractive area for investment is banking, payments, and transfers, followed by Crowdfunding and Lending and Insurtech / Investment & Savings.

Regulation: a requirement for Fintech in Chile

The lack of regulation creates uncertainty in investors, so the study speaks of the need for a law that generates greater confidence in the sector and promotes investment, as is already happening in Mexico.

Currently, 96% of fintech in Chile are legally constituted, but 86% are not registered as financial institutions. The Financial Market Commission supervises only 17% in Chile.

Ruiz-Tagle positively sees that there is a proportional regulation, where fewer requirements are asked of new participants as this promotes innovation. Even so, 63% of fintech consider it is challenging to comply with the regulation of the country, so they perceive a need for modification.

Barriers in Chilean Fintech expansion

Fifty-seven percent of the participating fintech points out that their main competitor is traditional financial service providers and that building alliances with banks and other financial institutions are the most significant impediment they have faced when it comes to scaling up their business.

Half of those surveyed by the study consider that fintech in Chile are prepared to compete internationally. Fintual, Destácame, and Khipu excel in this process of expansion.

Interview with Ángel Sierra, CEO of FinteChile (in Spanish)