Colombian FinTech is Booming. And It’s Becoming a Hit

fintech in colombia

Traditional banks struggled by the pandemic outbreak, SMEs without access to credit lines, Government support and foreing investments. Right now, Colombia is showing us plenty of opportunities

Colombia is a country where the FinTech entrepreneurship ecosystem is emerging at an incredible rate and the FinTech startups are changing the game rules for the banking industry of the region. FinTech solutions have proven to be crucial on the financial inclusion of small business, companies, entrepreneurs and, of course, of normal people.

Especially nowadays amid Covid-19 uncertainty, FinTech has become everywhere a privileged tool to reshape the economic recovery. Concerning Colombia, FinTech is continuing its upcoming momentum.

How many Fintechs are active in Colombia?

According to data, by 2020 the Colombian FinTech ecosystem has 322 companies that are classified into verticals or segments as follows:

  • Digital credit;
  • Digital Payments;
  • Business Finance;
  • PFM and Wealthtech;
  • Regtech;
  • Cryptocurrency;
  • Insurtech;
  • Crowdfounding;
  • Neobanks.

Bogotà is the Fintech capital of Colombia

In terms of companies, analysts reported a 36% growth of whole sector in the last three years where Bogotà is arising as main Colombian FinTech incubator. In this framework, the Government's role in the development and evolution of the local FinTech market has always been central. The innovation comes hand in hand with the huge amount of startups that have emerged in the more developed economies like USA, Europe - and of course China - where nowadays payments is cataloged as the most innovative.

Is Colombia Ready to Be a Game Changer? 

Colombia is one of the countries - as the rest of Latin America - where a huge part of the people remains unbanked. Thus, authorities have put financial inclusion on the top of their digital agenda. On this front Colombia has advanced significantly issuing a public policy that allowed the financial system to expand throughout the country and increase access to several financial services providing, at the same time, smart solutions.

«Colombia has a great opportunity to advance on digital payments - stated Felipe Liga, Director of Regulatory Projection and Financial Regulation Studies Unit (URF) - Only 20% of stores accept electronic payments and 10% of transactions in the economy are made through these channels. Covid-19 has changed this trend with consumers asking now for new ways to access and provide financial services». Thus, the government is strongly supporting this new digital wave and the first step has been the discussion of a new digital payment law. In order to reverse this situation, the Government issued Decree 169 of 2020 through which the regulation of the low-value payment system is modernized, adjusting and specifying actors, roles and ranges.

Next stop, Open banking

The new target is open banking. As stated by local media, the country is developing its own open banking model, regulation that’s expected to drive competition – translating into better digital services for customers. The new law is expected to be ready in 2022 and according to a first draft, each financial institution will adapt to the regulations at its own pace. Actually the government decided to take a really hard-line approach. Colombia’s banks have different levels of development and digital sophistication. While there are institutions that have advanced with disruptive virtual products and services, many others only have internet banking when it comes to innovation.

The long term goal is to generate an open architecture that makes people’s lives easier, that generates greater mobility and lets financial entities finally understand the added value that open banking can have for their customers and business. Colombia is developing its own open banking model joining the list of countries - such as Brazil and Mexico - that not only become FinTech top players in the LatAm area, but have also dubbed its efforts to put in act a regulatory framework to support financial inclusion. As stated by URF, the regulation still “does not have a defined scope, per se,” however, the whole process will require a “step-by-step” construction, starting, preferably, with the incorporation of savings and loans products into the model.

Colombia Aims to Be the New LatAm FinTech’s Hub

Despite the topic concerning how to build a concrete financial portability is still open, Colombia’s open banking plan has been well received by financial institutions. By the way, the path is just at the beginning and Colombian FinTech is facing several challenges. Asobancaria* argued that the new laws also need to be implemented by clear regulations for third parties consuming the data. “Enabling APIs should encompass all entities that also handle users’ financial information, not just banks”, stated last summer the association.

The new regulations have been seen as a necessity to start developing a real open ecosystem and being competitive with neighboring countries launching Colombia in a new era of smart payments. However, the whole sector needs to continue innovating in digital solutions and authorities, acting as financial solicitors, should draft defined rules.

Notwithstanding, FinTech is becoming the best tool for local small business to get loans. According to figures from CAF-Development Bank of Latin America, “in the case of Argentina, Brazil, and Mexico, which represent 65% of the region’s GDP, only 40% of formal small companies have access to a line of credit, while more than 95% of large companies enjoy this and other financial services.” A pattern that is repeated in Colombia too where access and cost of credit are the main obstacles for SMEs to do business. SMEs are neglected by the traditional system. The combo between the pandemic outbreak and the obstacles by banks were the perfect fuel let Colombian FinTech rocketing. Gormvent support made a crucial role to let this journey start, but foreign investment gave the know-how to local players. According to data, from 2017 to 2020, investors have put more than $1 billion in it, of which $300 million landed in the first five months of the pandemic. In 2019 the Japanese conglomerate SoftBank, invested almost $ 1bln in Rappi*, and SoftBank is only on the top of the list.

Transforming challenges into opportunities, this is the motto in Bogotà. Since Iván Duque Márquez took office as President of Colombia in 2018, national associations such as Colombia Fintech or the Colombian Chamber of E-Commerce, have become more active. It means the government is deeply connected with innovation. The Government aims to transform the country in Latin America’s third-largest FinTech ecosystem. Is Colombia ready? Maybe it is too early to answer, but the country has already started its own path where fintechs are not afraid to get their hands dirty. And foreing investor are welcomed to take part of the journey.


*Asociación Bancaria y de Entidades Financieras de Colombia

*Colombian startup unicorn Rappi is one of the first Latin American super app