Latin America is at the center of a financial revolution driven by banking digitalization. According to the World Bank, approximately 40% of the adult population in the region still lacks access to formal banking services, which, in turn, limits economic and credit opportunities. Therefore, financial inclusion is key in transforming this restrictive scenario into a massive growth opportunity for companies operating in the financial sector.
Meanwhile, financial digitalization is advancing rapidly, with a clear example being the consolidation of Pix in Brazil as the leading payment method, used by nearly 77% of the population, according to the Central Bank of Brazil. Similarly, in Mexico, the instant payments platform CoDi, developed by the Bank of Mexico, already has more than 12 million active users and is expanding as a digital alternative for instant fee-free transfers. Such financial inclusion initiatives like CoDi are pivotal in integrating more people into the formal financial system. Likewise, in Colombia, Transfiya has become one of the most widely adopted digital payment systems among end users and small businesses.
As a result, what was once a fragmented and exclusionary financial system is now becoming a highly competitive and rapidly expanding market. This transformation not only allows companies offering digital payment, credit, and financial management solutions to capitalize on this new reality, but also further accelerates financial inclusion across the region.
Open Banking vs. Open Finance: differences and business opportunities
The evolution of the financial sector in Latin America is marked by the adoption of Open Banking and Open Finance, two complementary but fundamentally different concepts aiding in financial inclusion.
Open Banking enables users to share their banking data securely among different institutions via APIs (Application Programming Interfaces), making financial services more accessible, agile, and personalized. This stimulates competition and expands credit offerings, especially for those who previously lacked a formal financial history.
Open Finance, on the other hand, extends this concept to a broader ecosystem, integrating not only banking data but also insurance, pensions, investments, and other financial products, creating an even more interconnected system. This model allows financial companies to develop more sophisticated products and offer comprehensive solutions to their clients, thereby promoting financial inclusion.
Security is a critical aspect of this ecosystem. To ensure data protection, regulations are being strengthened across Latin America, setting standards for authentication and responsible use of shared information. Some essential requirements for institutions operating within this new model include:
- Advanced encryption
- Multi-factor authentication
- Explicit user consent
Additionally, a McKinsey (2024) report estimates that implementing Open Banking and Open Finance could generate an economic impact of up to $124 billion in Latin America by 2025, not only driving financial inclusion but also unlocking new monetization opportunities for fintechs and banks that leverage this transformation.
Instant payments and the financial infrastructure in Latin America
The rise of instant payments goes beyond financial inclusion, it represents a profound structural shift in how payment systems operate across Latin America. Instead of relying on traditional intermediaries, instant payments enable direct, real-time, 24/7 transactions with lower costs, making them increasingly popular among both consumers and businesses.
Unlike traditional banking digitalization, which required robust infrastructures and bureaucratic processes, instant payments break down barriers by offering transparency, speed, and interoperability. This benefits SMEs, e-commerce platforms, marketplaces, and even large corporations, helping them optimize cash flow, reduce transaction costs, and enhance operational efficiency.
Financial service providers must quickly adapt to this new reality. The challenge is no longer just about offering digital payments but ensuring full integration between different financial systems, allowing seamless transactions across countries and platforms, ultimately enhancing financial inclusion.
Challenges and security in the digital landscape
Despite advancements, the expansion of instant payments and open banking also brings significant challenges, particularly regarding transaction security and reliability. The rise in digital transactions has led to an alarming increase in financial crimes, requiring massive investments in security infrastructure and regulatory compliance.
In Latin America, cyberattacks related to financial fraud have skyrocketed in recent years. According to Febraban (2024) data, digital fraud involving instant payments has increased by 200% in Brazil, making digital security one of the sector’s top concerns.
The threats include:
- Phishing: Attempts to steal banking credentials and sensitive data;
- Transactional fraud: Unauthorized transfers due to weak authentication measures;
- Account takeover fraud: Hackers gain access to users’ digital accounts to carry out fraudulent transactions.
To mitigate these risks, banks and fintechs are investing in artificial intelligence and machine learning solutions, capable of detecting suspicious transactions in real-time. Additionally, local regulations are being strengthened, requiring multi-factor authentication and continuous transaction monitoring.
The regulation must keep pace with this rapid wave of innovation, ensuring that security is not compromised as the financial sector moves towards a more digitalized and accessible model.
Scaling business in the new financial era
The technological advancements and the direct impact on financial transactions worldwide demonstrate that digitalization is no longer just a trend – it is a consolidated reality. For companies looking to operate and expand in Latin America, having the right strategic partner makes all the difference. Promoting financial inclusion is crucial for businesses to thrive in this evolving market.
FacilitaPay enables companies to scale their operations in emerging markets by integrating multiple local payment methods, ensuring efficiency, compliance, and a seamless payment experience for their clients. If you’re looking for a practical, tailored payment solution to support your growth in emerging markets, contact our specialists today.
