The future of fintechs in Peru: opportunities with financial technology post COVID-19 by Juan Antonio Lillo Paredes
Article prepared with Bloomberg technology and CFA curriculum in the Finance and Investment Lab – FILAB of USIL, with the collaboration of the team from “training the trainers” program of FILAB: Fiorella Santillan, Billy Valero, Victor Rodriguez and Mayra Lopez (director of Research Community of FICLUB), under the supervision of the head of FILAB, Juan Antonio Lillo.
Data about fintechs in Peru and the world
According to E-marketer, social distancing due to COVID-19 has accelerated the demand for fintech solutions in digital payments. Not only have companies such as Paypal and Visa benefited from this momentum, but in-store payments have migrated to digital wallets or NFC cards with contactless technology. By 2023, bigtech companies are expected to account for 43% of virtual wallet adoption.
Currently, the number of fintech companies in Peru stands at 151 and it is expected that by the end of 2020 they will increase to 200 with US$ 4 billion in turnover, according to the latest study by the Lima Chamber of Commerce. According to the SBS, Peru’s legal framework allows the contracting of digital financial services, and on June 5, 2019, a bill was presented to establish the authority in charge of regulating and supervising the development of fintechs.
According to Finnovista, Peru is the fifth most sustainable country in the region with more companies of this type founded by women (42 %). In 2019, exchange fintechs, which reduce the risk of fraud, stood out.
Post COVID-19 opportunities for fintech in Peru: new business models
Online platforms for mobile and online payments (with yields between 60% and 90%) are driving the pace of Fintech growth, according to the latest Bloomberg Intelligence report (September 2020). Commercial payments are still made through paper checks (80% of the time), which has generated limitations for their issuance, authorization and approval.
Therefore, there is an interesting opportunity for new business models in which fintechs can accelerate their participation in the B2B payments market (globally estimated to grow by US$ 70 to US$ 100 billion in revenues) through card solutions, accounts payable automation software and real-time networks. To date, 42% of large companies and 70% of small companies globally do not have accounts payment automation, according to Bloomberg Intelligence.
Financial markets and fintech watchlist: stocks and indices to invest in
According to the most recent FILAB study powered by Bloomberg, the most robustly positioned fintech stocks in the COVID-19 era have been PayPal, Square, Visa, Mercado Libre and Mastercard with better than expected returns through 2021. The ARK Fintech Innovation ETF Shares Outstanding Index outperformed the S&P 500 with an annualized return since the beginning of the year of 678.41% vs. 5.85% for the S&P500.
Figura: Evolución del S&P500 (SPX) vs. el ARK Fintech Innovation ETF Shares Outstanding (ARKFSO) Index.
Nota: Datos Bloomberg (2020).
Línea de comandos: SPX COMP + ARKFSO .
Funciones: BI (Bloomberg Intelligence), COMP (Retornos Comparativos) y GP (Gráfico de Línea).
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• Bloomberg Intelligence (2020). Fintech console (BI FTECG). At the Bloomberg terminals of FILAB.
• Lima Chamber of Commerce – CCL (February 2020). Fintech Expansion. Chamber N° 914. From: https://apps.camaralima.org.pe/repositorioaps/0/0/par/edicion914/revista_digital_914.pdf
• CFA Program Curriculum (2020) Level 1 Volume 6. Reading 57. Fintech in Investment Management.
• CFA Institute Investment Foundations (2020). The Financial Services Industry.
• Deutsche Bank Research (2020, 16 of September) European FinTechs – Unapologetically disruptive.
• “El Comercio” (2016, September 26th). We present you the first Peruvian fintech, get to know it. From: https://elcomercio.pe/economia/dia-1/le-presentamos-primera-fintech-peruana-conocela-263384-noticia/?ref=ecr
• FILAB Insigths (28/10/2019). Special report about Fintechs. FILAB weekly report elaborated with Bloomberg technology. https://bit.ly/37ignlf
• “Gestión” (2020). Loan applications to fintechs expected to reach 1.2 million. From: https://gestion.pe/economia/solicitudes-de-prestamos-a-fintech-llegarian-a-12-millones-este-ano-noticia/?ref=gesr
• KoreFusion (2020), 2020 LATAM Fintech Report. From: https://korefusion.com/report-download/
• “SBS Informa” (2018). The benefits and needs of Fintech: Considerations for its regulation in the Peruvian financial system. Weekly Newsletter No. 35. From: https://www.sbs.gob.pe/Portals/0/jer/BOLETIN-SEMANAL/2018/B_S_35-2018.pdf
• “Vodanovic” (2019). The Fintech industry outlook in Peru. From: http://www.siicex.gob.pe/siicex/documentosportal/alertas/documento/doc/79431536radE2E60.pdf
Juan Antonio Lillo Paredes
Economist, M.B.A., P.hD (c ). Head of the Finance and Investment Lab at USIL, Finance and Investment Lab – FILAB. He has been assistant deputy manager of Treasury Risk Management at Banco de Crédito, specialist in international cooperation at the Ministry of Defense, internal consultant at the Private Investment Directorate of Proinversión, at the School of Management and Economics (Gerens) and for Microsoft Peru on issues related to Bloomberg financial technology and capital markets.