As of April 2023, there have been 1,000 energetic fintechs in Latin America (LatAm) with a overwhelming majority specializing in monetary inclusion, tackling the problem of 70 per cent of the inhabitants not gaining access to formal monetary providers. Em Conversa seems to uncover what the long run holds for fintech within the area because it was valued at $2.1billion in 2022 and continues to quickly develop.
In our newest instalment, we sat down with Nelson Castellanos, chief partnerships officer at HDI Embedded – an embedded insurance coverage supplier, a part of the Talanx Group model (a European insurance coverage group). Born in Colombia, Castellanos has labored within the sector for over six years; throughout this time, he has labored on insurance coverage programmes for a number of the largest companies globally. Specializing in LatAm insurtech, we spoke to Castellanos about the way forward for the market within the area.
What’s your expertise in LatAm?
I moved to the UK roughly 16 years in the past, however as a Colombian, I’ve at all times been very near the LatAm market. It helped that a number of the corporations I’ve beforehand labored at had a foothold out there, protecting me within the loop.
For instance, one in all them partnered with one of many largest non-public operators on the time, Despegar (think about them just like the LatAm model of Skyscanner) and that was the most effective embedded insurance coverage programmes launching in LatAm delivering options out there. No matter the place I’ve been in my profession, I’ve at all times stored a watch on what’s going within the area because it actually is an untapped marketplace for insurance coverage options.
What are some insurtech traits we’re seeing in LatAm?
Insurtech has been very energetic within the area. The actual fact massive insurance coverage corporations like Allianz, MetLife and Zurich have expanded there’s proof of this. What makes it much more fascinating although, is that every of those massive companies has introduced their very own insurtech twist to the area. They’re undoubtedly serving to drive the sector’s development.
Apparently, what we’re seeing within the area is that insurtechs are focusing on completely different verticals as a substitute of getting a common strategy to the market.
Partnerships are an enormous factor as effectively. We’ve seen large insurtech suppliers like Origin arrive out there and make a huge impact. They closed a partnership with Bolero, a low-cost airline in Mexico. Consequently, they supply journey insurance coverage for Bolero’s clients. We now have additionally seen Nubank partnering with Chubb to ship residence insurance coverage to their customers.
How does LatAm fintech examine to the remainder of the world?
Many of the inhabitants in LatAm doesn’t have entry to monetary providers. Subsequently, there’s a big hole for fintechs and, in flip, insurtechs within the area.
To make the area extra accessible to fintechs, many nations like Colombia, Chile and Argentina are adjusting their laws. Ten to fifteen years in the past, each nation within the area had the identical monetary providers conglomerate with robust ties to every nation’s authorities. Consequently, it was very tough for brand new entrants to enter the market because of the laws carried out by the governments.
One other fascinating factor to notice concerning the LatAm area and the way it compares to others is the emergence of the center class. As such, the demand for monetary providers has additionally emerged. One nice instance is Nubank. It was once inconceivable for a Brazilian to get a bank card. Nubank has utterly uprooted this although. In simply 5 years, the neobank has made it attainable for almost each Brazilian to get a bank card now.
What are some distinctive insurtech challenges within the area?
Distribution is the largest problem with regards to insurance coverage. Nearly all of the time, while you need an insurance coverage coverage, you need to go to an insurance coverage dealer or workplace. Displaying how outdated it’s, the fashionable answer is similar to that present in Europe 20 years in the past – the place it’s worthwhile to fill in a type to purchase your insurance coverage merchandise.
Subsequently, creating channels that may distribute insurance coverage insurance policies is proving to be a problem presently.
The second problem is competitors. The penetration charges within the area are rising and there’s a lot of curiosity from completely different insurance coverage corporations. Be it conventional insurance coverage suppliers or native ones – many try to capitalise on these new alternatives.
The final challenge is de facto with customisation. Many individuals wouldn’t have a coverage tailor-made to them and as such can discover themselves paying for one thing which doesn’t cowl what they want.
How do you suppose fintech and insurance coverage are going to evolve in LatAm?
Rules changing into extra versatile are undoubtedly going to play an enormous half in advancing each the fintech and insurtech sectors. We are going to see extra gamers enter the market and that’s at all times an excellent factor.
In regard to distribution, I feel we’ll see extra non-financial providers corporations turn out to be fintechs. One nice instance is Chiper. You discover small shops throughout each neighbourhood they usually’re digitising now which in flip can act as a channel to distribute their merchandise.
I actually consider non-financial providers will gravitate in the direction of changing into fintechs and the extra we see know-how like embedded finance and open banking enter the area, the sooner the change will happen.
