Latin America: Challenges and Opportunities in Dynamic Emerging Markets

About eight years ago, I worked for a bank in Colombia that used a helicopter to deliver cash to small towns in very remote parts of the country. Upon landing, it would often be met by people who had travelled for a day to get there. They had set forth by horse, scaled mountains and crossed rivers - just to collect a small amount of money that would see them through the rest of the month.

And because they didn’t know exactly when the helicopter would arrive, sometimes they spent a day waiting around, which meant people were regularly spending up to three days a month travelling to a town to pick up some money and return home.

I think about those people, and I wonder what it’s like for them now - when instead of striking out on a gruelling journey across mountains and rivers, they simply take a phone out of their pocket and see the money they need appear on the screen. Today, as vice president of network development at global payments company Thunes, I understand the impact of technology on the way people bank and work. But I also know and feel from personal experience that this technology profoundly affects how people live here in Colombia and throughout Latin America.

The rapid expansion of the Internet, mobile phones and digital payments is triggering a cascade of progress that is improving the wealth and well-being of hundreds of millions of people, and it’s just getting started.

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The good

Let’s look at some numbers that illustrate how much progress we are making in the region. Every year, another 15 million people in Latin America start using the mobile Internet for the first time, which will bring the total number of users to about 424 million by 2025. The amount of data being sent over these mobile networks is even more impressive, increasing 50% a year as users ramp up their consumption of video, social media and financial services like digital banking.

Just one of these digital banks - Nubank in Brazil - has grown from a little over one million customers five years ago to 40 million today, making it the biggest digital bank in the world. Everywhere we look in Latin America, we can see evidence of a massive and accelerating transition to a digital future.

There’s a lot to celebrate. But there is also a long way to go - because, despite all of this progress, Latin America continues to wrestle with some stubborn problems from its past.

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The bad

Even with the rapid adoption of technology in Latin America, almost 80 million people out of the region’s total population of about 650 million still lack access to the Internet. While smartphone use is rising quickly, it only amounts to a little over half of the people in countries like Mexico.

And yes, digital payments are expanding, but economies throughout the region still depend heavily on cash, with up to 90% of payments in Mexico conducted with paper money and about 70% in Brazil.

This is partly due to the large number of people who still don’t have a bank account. Among medium to large countries, Mexico has the fifth-highest share of unbanked people in the world at 63%, with Peru, Colombia and Argentina all in the top ten.