How Spain has become the Perfect Gateway to Latin America Fintech Market
The Latin America startup ecosystem is having a great year. A country is becoming the forerunner to such a lucrative market: Spain. Let’s see how companies based here are making use of linguistic and cultural ties to break into the LatAm fintech market.
Just as Miami has long been a key gateway for Latin American startups to launch their U.S. operations–attributable to its bilingual community and close ties to the region–Spain also provides those startups unique advantages to launch and grow their ventures in Europe. That’s why for those European startups looking toward Latin America, and vice versa, Spain is playing an increasingly critical role.
Let’s talk about numbers. According to Robeco's latest report, Latin America is home to a population of roughly 450 million mobile phone users, which is expected to reach 484 million by 2025. In countries such as Chile, Perù, Argentina, Brazil or Mexico, rather than moving from cash to credit cards and electronic payments over the span of several decades, new internet users will typically go straight from cash to digital wallets, as many of them will get a smartphone before they even open a bank account. Thus has made Latin America a very fertile ground for fintech.
Barcelona is the right channel to LatAm fintech market
The Spanish technology ecosystem has matured rapidly in recent years, evidenced by all-time high levels of venture capital investments going into Spanish technology companies in 2016 and a growing interest from international investors. With 46 million inhabitants, Europe’s fifth largest economy is one of the fastest growing countries across the developed world. Over the past few years, Spain led talks for the EU-Mercosur, EU-México and EU-Chile agreements, while countries such as Argentina, Brazil, Chile, Mexico, Colombia and Perù have the most significant commercial ties to Spain.
Few years ago, Spain’s Seaya Ventures and Banco Sabadell (InnoCells), for example, have invested in startups such as Bewe, a platform that helps beauty and wellness businesses streamline their operations; financial platform Coru (formerly CompraGuru.com); and consumer payments platform UnoDosTres. Spanish telecommunications giant Telefónica operates two programs that invest in startups: the Telefónica Open Innovation and Wayra, a global accelerator program with a presence in 12 countries across Europe and Latin America, media reported. By the way, there is one city that actually is the forerunner of Spanish new adventure in Latin America: Barcelona. All those fintech companies and startups based here, are making use of linguistic and cultural ties to break into the Latin American market.
The ID Finance, N26 and Unnax case studies
Let’s start with ID Finance. Launched by Boris Batine and Alexander Dunaev, from its headquarter in Barcelona, the company is focusing today it’s attention on the Latin American market - particularly Brazil and Mexico. The decision isn’t just because of the region’s size - a population of more than 600mln people, but also a strong rule of law and a regulatory landscape that supports financial technologies. The choice of Barcelona has allowed the company to hire the best Latin American staff in roles such as data science and portfolio management, says Dunaev to media. Today Barcelona is arguably the most active startup hub in Spain and has been ranked as the fifth-largest European startup hub for the past four years. The city also ranks third on the list of cities where founders would most prefer to launch their companies. All of these qualities create a unique hiring advantage for Latin American startups. Nowadays, the company is opening offices in São Paulo, Brazil, Mexico City, Mexico, and an engineering office in Minsk, Belarus.
Another company settled here is N26. The Berlin-based fintech company, in 2016 opened an office in Barcelona, its first major operation outside Germany, due to expanding its operations hoping to capitalize on linguistic ties between Spain and Latin America. N26 is currently preparing to launch services in Brazil, and Barcelona’s talent pool is central to the company’s plans, media said.
Last year, Rapyd, a global Fintech as a Service company, today announced a deal with Bnext, Spain’s first mobile neobank for cash collection with plans to expand services across Latin America. The partnership will allow Bnext customers to make cash deposits to their accounts in 30,000 locations in the country and will expand to interbank deposits later via Rapyd’s global payments network. By the way, Spain is becoming a gateway to the lucrative Latin America fintech market not only for European companies but for Chinese realities too. “Spain is a limited market but can serve as a gateway to Latin America for Chinese investors too”, has told to Xinhua Carlos Sentis, CEO of consulting company Henkuai.
Back to the topic, such a huge presence of international fintech players in Barcelona has drawn Spanish companies away from the financial capital in Madrid. Let’s take Unnax, a Barcelona-based open banking solutions provider. In 2017, the company began operating in the Dominican Republic in 2017. At the beginning, it was just a pilot project to lay the groundwork for expansion into larger Latin American markets, but even thanks to the pandemic outbreak, the business is growing.
Investing in talents
“Unnax’s experience in Spain, Portugal and Italy can provide a blueprint for success in Central and South America due to cultural similarities with the Southern European market”, said Julián Diaz, co-founder and co-CEO of Unnax, to media. “The customer behaviour is the same. I think the main advantage we have is that we understand Latin American financial behaviour. And data collection here is so similar to LatAm, because real financial data is so difficult to find”, added Diaz.
So, why choose Spain? In 2016, the Spanish government program, ICEX-Invest, launched Rising Startup Spain, an initiative designed to attract international talent and innovative business models to Spain, and position the country as a European hub for technology and innovation. The Spanish government also passed a law to attract foreign talent and investment, which includes a visa for foreign entrepreneurs requiring little more than a business plan and enough money to support themselves in order to stay in the country. Thus the country is investing in talents. More recently, at the Madrid Innovation Driven Ecosystem (MIDE) annual international bootcamp held last September, has seen the participation of startups from Mexico, Chile and Perù.
According to data, through immigration, culture and diplomacy, Spain is preserving a very special relationship with Latin America, that’s why an increasing number of Latin American startups are selecting Spanish cities as their European headquarters, including Argentina’s Satellogic, Brandtrack and VU Security, Colombia’s Platzi, Brazil’s Creditas and Mexico’s Pulpomatic.