Over the past decade Latin America has emerged as a hotbed of startup innovation, attracting over $16bn of investment in 2021 alone. Fintech and insurtech have particularly captured the attention of global investors and VC funds, drawn by the region's highly connected yet largely unbanked or underbanked customer base.

Historically, traditional banks in the region have been inaccessible to the lower segments of the population, deterred by bureaucracy and high fees. Until recently cash was king for daily transactions, with many small and medium-sized enterprises (SMEs) avoiding official lenders. However, the onset of COVID-19 propelled a shift towards digital payments, online retail and mobile-based services, acting as a catalyst for financial inclusion.

Central banks also slashed interest rates during the pandemic, boosting VC funding and spurring investors seeking higher returns in the medium term – a perfect storm for a fintech surge. By 2021, Latin American digital banks had amassed over 30mn customers – primarily in Brazil and Mexico – and about 300mn users employed digital payment services for transactions totalling $215bn, according to the IMF.

These figures are likely higher today as Nubank, the renowned Brazilian neobank now valued at $44bn, recently hit the milestone of 100mn customers across Brazil, Mexico and Colombia.

The shift to contactless payments and e-commerce, fuelled by high smartphone penetration and a large pool of ambitious STEM graduates, has created a fertile environment for fintech in the region.

Against this backdrop, Juan Pablo Ortega, a young Colombian entrepreneur, began his journey in 2015. After studying in New York and passing on a career in civil aviation, he co-founded Rappi, a food delivery service that evolved into a multi-functional app offering payment solutions. By 2019, Rappi had achieved unicorn status and reached a valuation of $5.2bn by the end of 2023.

He later launched Yuno, a leading payment orchestrator enabling companies – including McDonald’s, inDrive and Avianca – to facilitate seamless payments across borders. Last month, bne IntelliNews sat down with Juan Pablo at London Tech Week, where he discussed his journey to Yuno and shared insights on the challenges and opportunities facing the burgeoning fintech ecosystem in Central and South America.

"One of the biggest pain points at Rappi was payment," he says. "When we launched in Mexico, we faced numerous chargebacks, rejected transactions, and significant fraud. Many users were uncomfortable entering their credit card numbers." This led him to establish Yuno, a payment orchestrator integrating various payment providers, acquirers, and banks into a single platform.

Launched in 2022, Yuno recently completed a $25mn funding round and is eyeing expansion into Asia and the Middle East, positioning itself as one of Latin America's few truly global tech companies. 

“There was an urgent need to simplify this fragmented and complex payment ecosystem. It became clear there was a big untapped market for streamlining payment flows. We needed to simplify transactions, improve efficiency, and enhance security by offering a single interface for all payment processes and integrating fraud detection capabilities.”

Fragmentation is a sore spot in the region, as national banks tend to promote their own payment systems, which enjoy high loyalty rates among domestic customers. However, this does not always translate into success, owing to local specificities and different cultural contexts. Additionally, these indigenous methods offer little interoperability, posing challenges to companies operating across borders. 

“Pix [an instant payment platform launched by Brazil’s central bank in 2019] is extremely successful. 70% of Brazilians today prefer to pay with it. Mexico tried to replicate the model with Codi [a similar system promoted by Banco de Mexico], but it completely failed, as cash still rules there for small purchases,” Juan Pablo points out.

“And if you start looking at differences, over 90% of Brazilians have a bank account, whereas in Mexico about 65% of adults remain unbanked,” he adds, underscoring the correlation between banking penetration levels and the success of digital payment systems. 

However, in Latin America “we cannot really talk of a regional trend,” he warns, noting the highly uneven success rate and regulatory frameworks of digital payments across the region – a common issue in emerging markets across the globe. 

“That’s why Yuno sees bigger opportunities in Africa, Asia and Latin America, and why we're mainly focusing on expanding in these areas.”

But how does this affect retailers and merchants seeking to enter these markets? “As you go into a country, if you can’t offer the local payment methods, you cannot really compete. For example, Uber Eats is having a hard time in Latam; they [have] mostly left because they didn't have local payment methods. They didn't ‘feel local’,” he explains, stressing the importance of offering the myriad domestic payment platforms that customers trust. 

“We're creating a technology that is going to be the future of payment infrastructure to offer services to banks, payment processors and different players in the ecosystem. I don’t see Yuno as a competitor to traditional banks, but somehow we work along with them to help them evolve. And we're a technology enabler for all the different players in the ecosystem,” Juan Pablo adds. 

Yuno today connects sellers with over 300 payment methods worldwide. The company also helps merchants maximise payment transaction approval rates – the percentage of payments that go through successfully – and save costs by rerouting transactions through faster, more efficient and less costly providers. 

“In Latin America, the average approval rate is 70%, so basically 30% of revenues are being lost due to inefficiencies in the payment systems,” he observes.

But Yuno’s ambitions go well beyond the region, as the company grows its presence in Southeast Asia – namely Malaysia, Indonesia, Singapore and Thailand.

Speaking of regulatory environments, Juan Pablo reveals that, despite important differences within countries, the area has become relatively fintech-friendly. Overall, Brazil and Mexico – respectively the region’s first and second-largest economies – are today best placed to support fintech growth, he claims.

Solid regulatory frameworks there enable new business models to thrive, fostering a healthy kind of fintech ecosystem. Still, some challenges persist.

“In Mexico, if you apply for a fintech licence, it takes four or five years, which is not ideal if you're starting a business. So there is a lot of work to do, but we are moving in the right direction,” he says.

Mexico today embodies what Juan Pablo describes as a “healthy ecosystem”, bringing together local investors and VC funds willing to invest in a corporate-friendly regulatory landscape. 

Chile, Peru and Colombia are lagging a bit behind in terms of legislation, but they are steadily catching up, he argues. Meanwhile, Argentina, despite its long-running economic woes, is home to a wealth of highly skilled software engineers, making it a preferred source of local talent.

Latin America is no stranger to political and financial instability, but Juan Pablo is bullish about the local entrepreneurs’ resilience. Citing the case of his native Colombia, he notes that “even with these [political] headwinds, we have created a thriving technology company able to compete on a global stage, and we're doing it from there.”

By leveraging the region’s competitive advantages, Yuno is poised to play a pivotal role in establishing Latin America as a leading incubator for financial innovation.

“We want to turn Latin America into a major hub of development, a hub of technology, and today we're doing just that, shaping the way global businesses operate,” he concludes.