Chile Fintech Regulation and Ecosystem

Fintech in Chile

The Fintech ecosystem in Chile has grown considerably since 2019, with the number of Fintech companies having increased by 60%. There are currently approximately 112 Fintech companies in Chile. Among the main characteristics we have is that these Fintech companies focus on the B2B segment and that the main source of financing for the majority (27%) of Chilean Fintech companies are angel investors. The main Fintech segment in Chile is payments and transfers (23% of the total), followed by the segment of Business Finance Management solutions (Enterprise Financial Management) which represent 20%. In third place we have the lending sector with 13% of the total

The complete list is as follows (Finnovista, 2021):

1. Payments and Remittances, with 42 startups (23%)

2. Business Finance Management (EFM), with 35 startups (20%)

3. Lending, with 24 startups (13%)

4. Business Technologies for Financial Institutions (ETFI), with 18 startups (10%)

5. Score, Identity and Fraud, with 12 startups (7%)

6. Insurance, with 12 startups (7%)

7. Wealth Management, with 10 startups (6%)

8. Crowdfunding, with 9 startups (5%)

9. Personal Finance Management (PFM), with 8 startups (4%)

10. Trading and Capital Markets, with 6 startups (3%)

11. Digital Banks, with 3 startups (2%)

Moreover, approximately 63% of the fintechs offer at least one financial inclusion solution. Also, 69% of these fintechs have more than 3 years of operation, reflecting a low mortality rate of 12%.

Regulation

This 2021 was a year of change in the fintech ecosystem in Chile since the president of the country Sebastian Piñera presented, with great urgency in september, a bill to regulate technological financial services, seeking the regulation of five types of technology services:

1. Collective financing platforms or “crowfunding”

2. Alternative transaction systems;

3. Credit and investment advisory services

4. Intermediation or order routing services

5. Custody services for financial instruments.

For each type of service, the regulatory requirements that must be met are established, under the principle of proportionality. Regulated service providers must first register in a “Registry of Financial Service Providers”, which will be kept by the CMF (Centro Competencia, 2021). Fintech regulation in Chile is going through moments never seen before and it remains to wait for the outcome of the approval of this new law in the coming months

Lending Fintech in Chile

One of the most popular lending fintech companies in Chile is Xepelin, a Chilean fintech that applies Data Science to the risk assessment of SMEs. With this solution, SMEs can obtain a fast financing approval when they need immediate liquidity, omitting the series of documents and paperwork required by banking institutions. As of October 2020, the fintech already has 1,000 registered companies and more than USD $ 90 million financed (Startupeable, 2021)

Microfinance in Chile

Fondo Esperanza is a pioneering social development organization in Chile in implementing a comprehensive service focused on women and men entrepreneurs from vulnerable sectors, with the aim of providing them with tools both for the development of their businesses, as well as for their personal, family and social growth. It has more than 17 years of experience supporting female and male entrepreneurs through a methodology consisting of the delivery of microfinance services (microcredits and microinsurance), training and the strengthening of their support networks (Fondo Esperanza, 2021)