Up to as much as 70% of Latin America lacks affordable and accessible financial services, with many economies being unbanked or underbanked. Opening a bank account often requires an individual to provide proof of employment, citizenship, and other relevant documents. For example, in Chile, to open a bank account, a person is required to present at least four documents plus meeting a two-year residency requirement.
These obstacles are put in place by banks in an effort to prevent money laundering and other illegal activities. Whatsmore, some banks will nor service an individual if they are not in the top 20% of income earners in the country.
This has created oppressive requirements for low-income regions combined with high, and often hidden, fees for users of bank and credit cards. Brazilian consumers have reported that one can expect to pay at least a 190% interest rate for credit cards and loans.
A silver lining to these unfavorable conditions are the Fintech startups introducing innovative ways to reach these underserved communities. These companies are increasing affordable financial services to unbanked populations in Latin America through contactless payments, nontraditional credit scoring models, cryptocurrencies, and artificial intelligence.
This research and article was led by Diana Rojas-Torres of Universidad de La Sabana. From 15 September – 15 October, we take a moment to celebrate Hispanic Heritage Month by highlighting the contributions and leadership of computing professionals and industries from the many nations of Latin America. Read more tech articles related to the celebration of Hispanic Heritage Month.