Despite political instability and lower investments, fintechs continue to proliferate in Peru

With 132 fintech startups, Peru is coming to life in Latin America as another important hub for financial technology.

Usually relegated in terms of financing by larger markets in the region, the sector continued to grow at a steady pace in a country with significant financial inclusion gaps.

According to a report this year by the Inter-American Development Bank, Peru is the largest fintech ecosystem outside of Latin America’s big five economies – Brazil, Mexico, Argentina, Colombia, and Chile. With an average year-on-year growth rate of 69% up to 2021, Peru leads the IDB’s ranking of countries with an emerging fintech sector.

Indeed, factors that explain the growth of its ecosystem can be found in the underdeveloped financial sector. In that regard, the country shares much of the problems of its Latin American peers. That is low banking penetration, sizeable informal workforces, and a preference for cash transactions.

In the country, barely 42.6% of adults had access to bank accounts as of last year. This compares to 48.7% in Argentina and 70% in Brazil. On the contrary, inclusion by this metric is higher when compared to Mexico, with 36.9%.

Almost four in every 10 fintech startups in Peru have a proposition built around financial inclusion.

Growing ecosystem

Last month, Prestapyme, a lending fintech that caters to SMEs, took $2 million from the Inter-American Development Bank. It was the first IDB investment of the kind into a Peruvian fintech. Earlier this year, Wolet, a fintech also focused on small enterprises, took $2 million to expand its lending capabilities.

For local fintech leaders, these financing rounds, albeit small compared to Brazil or Mexico, herald a promising outlook for the sector.

“This news encourages the entire Peruvian ecosystem of startups and especially the fintech industry,” Roberto Vargas, president of the national fintech association, said in an interview. “At a critical moment for Peru in the face of its institutional, political, and economic challenges, a Peruvian fintech focused on providing financial services for micro, and small businesses create greater value for them.”

Roberto Vargas, president of the Peruvian Fintech Association.
Roberto Vargas, president of the Peruvian Fintech Association.

Admittedly, Peru is no small country. It has a population of 33.3 million. On the other hand, its GDP has grown almost uninterruptedly since the early 1990s to $220 billion. However, Peruvian fintechs face more significant struggles regarding securing capital.

For fintechs in emerging ecosystems, local startups often take the back seat in venture capital interest. And the political instability that has characterized Peru for the past decade does not support either investment in general.

More capital needed

For Dante León Altamirano, CEO of investment fintech TasaTop, the most significant challenge lies in securing funding. The struggle, he told Fintech Nexus, is to “find the right venture capital firms that know how to evaluate fintechs with a validated business model.”

Tapping more sources of funding, Altamirano argued, would pave the way for consolidation at a national level. Also, to fuel expansions to neighboring markets such as Bolivia, Ecuador, and Chile.

Thinking big when it comes to internationalization can make all the difference. “For entrepreneurs in emerging countries, having an internationalization strategy from the beginning is crucial to reach a scale that is attractive for investors who are currently very interested in the region,” Daniela Espinosa, Co-founder and COO of Ecuadorian unicorn Kushki, wrote in the IDB’s report.

Fintech leaders in Peru are confident that there is further room to grow and that the country will eventually consolidate itself as a relevant hub in the region. According to estimates from Peru’s fintech association, fintechs managed $20 billion worth of transactions last year. “We hope to double that volume in 2023, as well as to include more people financially,” Vargas said.

Collaboration with banks

He argues that more collaboration is needed with the traditional banking system. While international banks look more open to partnerships, Vargas said that some domestic institutions show reluctance to explore cooperative partnerships with fintech companies.

Indeed, Peruvian banks have also been active in unleashing their own financial technology initiatives. Banco de Credito del Peru launched Yape in 2018, a mobile payments app that allowed transfers using a cell phone number.

For fintechs to make further inroads in Peru, Altamirano underscores the relevance of promoting financial education and awareness. “We must understand that educating people in the financial field is not only granting cheap loans but also promoting the culture of savings,” he said.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.