The year is only three-quarters done, but it is safe to say 2019 has been a breakout year for fintech in Peru. Both the breadth and depth of the fintech ecosystem have increased compared to a year ago.
The fintech segment as a whole is growing, with startups now covering most fintech categories. In addition, individual startups have reached important inflection points and are taking their solutions to neighboring markets. For greater detail, take a look at PECAP‘s mid-year report which maps out fintech startups and highlights recent early stage investments.
Here are the five reasons 2019 is Peru’s breakout year in fintech:
1. Startups are branching out
Founders who used Peru as an initial testing ground are now exploring neighboring markets.
Some startups made the jump by joining international acceleration programs, while others are evaluating expanding to other countries on their own. With programs like Startupbootcamp and trips like the fintech mission to Mexico led by EmprendeUP and PromPeru, it is getting easier and easier to evaluate geographic expansion.
Local market dynamics in Peru have created conditions that have allowed two fintech segments, Factoring and FX, to reach critical mass. Varios companies, including Innova Funding, Innova Factoring and Facturedo, Kambista and Rextie are taking advantage of unique conditions in Peru to quickly achieve solid traction. These startups are now in a strong position to branch out to new markets.
2. Banks are buying
After trying digital transformation on their own, local banks now realize they need help. They are teaming up with innovative founders in order to keep up.
As this corporate mindset shifts we are approaching a tipping point for a healthier version of corporate venture in Peru. Local banks are following the footsteps of regional players like Scotiabank and Santander who manage corporate venture funds set up or invest as limited partners in venture capital funds. Krealo, the venture arm of Credicorp, a publicly traded Peruvian bank, recently made its first investments in startups. Culqi, a local payments gateway, and Independencia, a lender, both received equity investment from the bank in 2019.
3. Reaching world-class status
It is big news when Peruvian startups are recognized internationally.
During 2019, fintech startups Keynua and Apurata were selected by top global accelerator Y-Combinator. Also this year, asset management startup Zest followed the footsteps of lender LatinFintech and digital insurance broker SeguroSimple to become the third team of fintech founders in Peru to reach Endeavor Entrepreneur status. These startups have experienced founding teams with deep knowledge of the problems they are solving and experience leading teams. Their selection by leading global programs validates Peru as a great market opportunity for fintech solutions, something previously highlighted by Kaszek Ventures’s investment in TiendaPago.
4. Sector specific investors
When early stage actors in startup communities begin to specialize by sector, it is a sign of a maturing market.
Both Inca Ventures, a venture capital fund, and Emprende UP, an angel investor network, are dedicating resources to support fintech startups. In addition service providers, including Sumara Hub Legal, are specializing in financial sector issues.
This demonstrates the existence of sufficient quality dealflow in fintech and, at the same time, will allow these investors to gain sector-specific insights. The result will be a steady stream of competitive fintech startups coming out of Peru.
5. Up-and-coming founders
New startups are entering the fintech dealflow funnel with fresh value propositions.
Afli, SomosMoto, Valía and Pagadespues have all burst onto the scene in 2019. Alfi was accelerated by LIQUID Venture Studio.
Going forward, watch out for other up-and-coming startups that didn’t initially realize had a fintech angle, but later become fintech startups. There are a lot of digital tools that financial institutions need to solve problem and users will find helpful to resolve pain points. These solutions may find a home in the fintech sector.
One final proof that 2019 is a breakout year for fintech in Peru is that there are so many startups, I have surely left out a few. They will have the last word in 2020!