With the installation of the first ATM in 1967 by the British multinational Barclays in London, financial technology companies, known as fintech (Financial Technologies), marked the transition from analog to digital financial services.
The Dominican financial market, with the passage of time and the advancement of technologies, has also developed to become one of the most active in the region. Companies operating in the Dominican Republic, 75% of which are of local capital, captured in 2021 around USD$183.3 million in investments (RD$10,631.4 million), 58% being private capital, according to the Dominican Association of Fintech Companies (Adofintech).
According to data released by the entity, 48% of those operating in the country are small companies, followed by micro companies with around 32%. Large companies have a share of 16% and medium-sized companies 8%. Meanwhile, foreign fintechs with operations in the local market are around 12 companies, of which 50% are from Latin America, 33% from Europe and 17% from the United States.
This ecosystem, which has been in its 3.0 stage since 2009, in Latin America and the Caribbean (LAC) has grown by 112%, going from 1,116 platforms in 2018, to 2,482 in 2021. In addition, it represented almost 23% of the total number of those globally, which are about 11,000 companies, according to the Inter-American Development Bank (IDB).
This increase in LAC is no coincidence, since entrepreneurs have observed and are seeking to respond to the unsatisfied demand for financial services in the region, especially in the micro, small and medium-sized enterprise (MSME) sector, which, in turn, represents nearly 93% of the total in these countries.
Another factor is that both large traditional companies and MSMEs are changing or migrating towards automation and digitalization of financial processes, in line with the trend in technology and the demands of avant-garde clients.
The level of development, legal openness and direct investment in these countries play an important role in the progress of FinTech, so they go intrinsically hand in hand. Indeed, according to available data, the two large LAC economies, Brazil and Mexico, have the largest number of companies in this segment.
At the end of 2021, the former had registered 771 fintech companies, or 31% of the total (2,842) in the region, and the latter, in the last 12 months reported 512 financial technology companies for 21%. Together, they represented more than 50% of those installed in Latin America and the Caribbean.
Behind them, Colombia (279 companies), Argentina (276) and Chile (179), which together with the first two, will account for 81% of the fintech companies in the region by 2021. This percentage has a decentralization trend, as there is a significant wave of “emerging” financial technology companies (as experts call them) in LAC.
This group includes Peru with 132 companies, Ecuador, 62; Dominican Republic, 55; Costa Rica, 44; Uruguay, 32 and Guatemala with 31 of these companies. During the period 2017-2021 the local market grew the most in relative terms with 129%.
The lines of digital financial services and products on which these Fintechs in LAC focus are in total 11, of which, payments and remittances, with 25%, lead the segmentations, followed by loans with 18%, business technologies for financial institution with 15%.
Also, corporate finance management, 11%; personal finance management, and insurance, 7% respectively. Meanwhile, wealth management, such as trading and capital markets, represents 6%. Finally, Crowdfunding and digital banking, both 5%.
In the Dominican Republic, the main enabling technologies on which the products and services provided by FinTechs were based, were led by application programming interfaces (APIs) in 88%, followed by cloud computing with 52%. This was followed by digital or electronic signature services at 37%, big data and analytics at 22%, artificial intelligence at 18% and chatbots at 16%. Biometrics (12%) and blockchain (8%) were the lowest percentage, respectively.
In terms of human talent, 84% of Dominican companies use a payroll model, and the other percentage use freelance collaborators. Of these, 48% have up to 10 employees, 42% from 11 to 50, while 4% have more than 150 workers and 2% operate with a payroll of between 51 to 150 employees.