Spending time in our markets is central to how we work at VEF. It provides us with first-hand insight and a deeper understanding of the local ecosystems, helps us build stronger connections with our portfolio companies, and keeps us in tune with the trends shaping these regions. This hands-on approach ensures we stay grounded in the realities of each market. Last month, VEF principals Éire Smith and Evin McKay spent time in two of our core markets – Mexico and Brazil – meeting with portfolio companies, peer VC investors, and exploring new pipeline opportunities. Here, they share insights on the latest developments in each.
Mexico is a bustling market for fintech. What is the most dominant trend in the market right now?
One of the big trends in Mexico’s fintech market today is the intense focus on the underserved consumer credit sector, specifically in credit cards. The growth potential here is massive, with fintech players targeting a segment of the market largely overlooked by incumbent banks. For instance, Nu entered Mexico in 2019 and has already amassed over 8 million users, scaling faster than it did in Brazil at a similar stage. A number of local and regional fintechs are also rapidly gaining ground, leading to strong competition for market share. This has driven a race to offer attractive deposit rates to draw in users and leverage cross-selling opportunities to grow their credit portfolios.
With that in mind, what does that tell us about the future of fintech in Mexico?
We’re excited for the future of fintech in Mexico, as it is accelerating financial inclusion for underserved consumers who have long relied on cash. Additionally, despite their rapid growth, even leading players like Nu have portfolios that are much smaller than those of incumbents, highlighting the scale of the opportunity fintech is playing in to. While the incumbent banks are waking up to the competition – for example, Santander has announced the launch of their digital bank offering in Mexico – we believe fintechs will come out on top due to their ability to innovate quickly and use technology to provide accessible financial services. Ultimately, this competition benefits consumers, who will enjoy better financial services as banks and fintechs vie to retain their loyalty.
Brazil is well-known for an evolving regulatory system, and rapid adoption of digital technologies. What are the most important trends we are seeing in Brazil right now?
Having just spent a week on the ground in São Paulo, the widespread proliferation of Pix is by far the most prominent and rapidly evolving trend in the Brazilian market right now. Pix is the name of Brazil’s real-time payment system. It was developed by the Central Bank and allows individuals and businesses to make easy, secure and rapid digital money transfers. Unlike traditional bank transfers or debit and credit cards which often take hours if not even days to complete, Pix transfers money instantly, 24/7, and operates seamlessly across any bank or digital wallet in the country – whether sending money to a friend, paying a merchant, or settling a bill.
What has been the impact of the rapid adoption of Pix?
It is hard to convey the overwhelming impact Pix has had on Brazil, not just on financial services, but also on daily life in Brazilian society. Most importantly, Pix has contributed significantly to driving financial inclusion. Since its launch, over 70 million individuals have made their first-ever digital money transfer, and now Brazil boasts an unbanked population of less than 10%. Pix is well on its way to becoming a global benchmark in real time payment system success.