COMMENTARY: INVESTMENT IN LATAM
Buildingbackbetter While investors took a raincheck on most deals this season, open banking platform Belvo struck gold in LATAM, as Co-founder Pablo Viguera explains COVID-19 has seen whole sections of national economies put on ice, so it’s no surprise to learn that investment in fintech has suffered, too. In its report analysing deals done in the first quarter of 2020, market intelligence agency CB Insights calculated that 404 deals were struck at a value of $6.1billion globally – the fewest number of deals since Q1 of 2016 and the lowest deal value total since Q1 of 2017. Of course, the impact of coronavirus didn’t begin to bite hard outside of China until March, so we can expect the performance for April to June to be far more depressing. It makes one LATAM-based fintech’s success in securing $10million in May to finance its product development and expansion all the more impressive. Maybe Belvo – launched last year in Mexico and Colombia to connect institutions, fintechs and developers over an open banking platform – got lucky. Or maybe investors judged it to be just too good an opportunity to miss. That’s because Belvo is positioning itself as one of the essential building blocks for the next generation of financial businesses in LATAM (Latin America) – a region where fewer than half the population have bank accounts and where platform solutions such as Belvo’s are seen as essential to building the financial infrastructure that governments are keen to promote. Or, as co-founder Pablo Viguera describes it, Belvo is providing the ‘picks and shovels’ to fintech innovators so that they can transform financial services in the region (with or without the banks). It’s been likened to Plaid – the financial services API (application programming interface) startup that helps developers in the UK and Europe share banking and other financial information. If Belvo is the ‘Plaid of South America’, then investors who poured money into it in the middle of a pandemic were probably given a confidence boost by the then still recent acquisition of Plaid by Visa for more
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than $5billion at the start of this year. Viguera acknowledges that Belvo was ‘very fortunate to have completed this fundraise’. “It’s testament, obviously, to the hard work the team has been putting in over the past year, but also it’s testament to the potential of fintech in LATAM,” he says. “It has the potential to be a transformational force across the region. Ultimately, we built the picks and shovels of the fintech innovators and, for us, it’s great to have the resources to then go on and equip these fintech innovators of today, or even those of tomorrow that will be able to exist because of us. “We’re extremely happy to be bringing onboard top-tier investors that can really help us for the months, years, and decades to come, and that not only share our vision about providing next-generation infrastructure but also have deep operational expertise in scaling infrastructure software-as-a-service, and specifically in LATAM.”
SoftBank leads charge Investment in LATAM-based fintechs had been accelerating hard before the global pandemic slammed on the brakes. The annual report from the Latin American Private Equity and Venture Capital Association (LACVA) revealed that venture capital investment in the region had soared from around £2billion in 2018 to $4.6billion last year. Fintech accounted for the biggest slice of the pie at 31 per cent. The $5billion SoftBank Innovation Fund, launched in early 2019, was a major factor in last year‘s growth, and was by far the biggest-ever technology fund to target the region. The Japanese bank’s interest could
be a rising tide that lifts all boats – given that it increases competition for seed-stage investment. Colombian delivery startup Rappi received a $1billion investment led by the SoftBank fund in April 2019, with other big deals including Brazilian digital bank Banco Inter ($330million), Brazilian lender Creditas ($231million), Argentine personal finance app Ualá ($150million), Mexican digital lenders Konfio ($100million) and AlphaCredit ($125million). SoftBank partnered with LATAM-based funds to increase the investment power, and benefit from their local knowledge. One of those funds is Argentina’s Kaszek Ventures, which, alongside Silicon Valley’s Founders Fund, was the group behind the Belvo deal. Viguera identified the opportunity for entering the LATAM market when working for peer-to-peer lender Verse. He was struck by the lack of inter-banking infrastructure, which would make expansion there difficult for Verse. Because Belvo‘s product provides some of the first open banking API rails for Latin America, demand is potentially huge – and growing fast due to the added pressure from coronavirus to develop digital banking. Mexico and Brazil lead the way in digitisation, with regulators in both countries driving open banking forward as a method of stimulating the economy and financial sectors. Both have worked closely with the UK’s Financial Conduct Authority to create systems that build on the British experience. But beyond Mexico and Brazil, Viguera says the LATAM picture is fragmented, with wide variation between national financial systems.
Belvo has the potential to be a transformational force across the region. Ultimately, we built the picks and shovels of the fintech innovators
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