Argentina is building a digital universe in the areas of finance, but its progress in infrastructure and regulatory framework finds a permanent conspiracy in regulations, tax burden, informality and macroeconomic instability.
The pandemic revealed the problems of structural adaptation of MSMEs (micro, small and medium-sized businesses) to join the dizzying growth of electronic commerce that was experienced in full isolation. These companies have at least 3 latent challenges in the sector:
1 – Informality as a result of high tax pressure and fluctuating cycles of the local economy.
2 – Financial exclusion
3 – Its low level of digitalization.
In the field of fintech, new financial services tools are being provided to audiences that were previously excluded. At a global level, the first steps were taken by “Big Tech”, which are the technological giants known as GAFAs (Google, Amazon, Facebook and Apple), in the case of the West, and as BAT (Baidu, Alibaba and Tencent), in the West. East. They all started by offering non-financial services and then ended up doing them with users on their different platforms.
Argentina has developed leadership in the region by promoting the figure of Payment Service Providers (PSP) with the aim of providing greater transparency to the use of resources by fintech companies and protecting users. Within the ecosystem, regulatory measures have been established to achieve interoperability between bank accounts and their CBU (classic MSME instrument) and electronic money accounts and their CVU (at current level of incursion and use).
Although with the 9.9% drop in the economy in 2020, digital payments grew enormously, now comes the path of trust and use of the tool on a regular basis. According to a report by IDB-Intal, based on an econometric model, a 1% increase in GDP in Argentina increases digital payments by 0.48 percent quarterly.
According to a study by the Argentine Fintech Chamber between 2018 and 2020, the number of fintech startups in Argentina has more than doubled, going from 133 to 268
For their part, MSMEs are having a very important obstacle to becoming “micro-multinationals” through the use of digital tools through payment systems that connect them with global clients and suppliers. When selling his goods and services in foreign markets, an entrepreneur has to settle his operation at a dollar below $100 and also pay withholdings and taxes; a total disincentive towards Argentine micro-exports and the generation of employment, but also towards the formalization of the economy via digital collection and payment tools . We live the opposite of the region: a payment in seconds by digital transfer is followed by a headache of months of discounts, withholdings and payment of taxes, all with an exchange gap of almost 90 percent.
In our country there are companies like Mercado Libre (with a presence in 18 Latin American countries and more than 144 million registered users) that has its own fintech ecosystem with Mercado Pago, Mercado Crédito and Mercado Fondo.
Recently Ualá became the tenth Argentine unicorn (neobank that is linked to a Mastercard prepaid card). Its growth in the pandemic was very important, it has 3.3 million prepaid cards in operation, of which 70% are outside the AMBA and a similar percentage corresponds to those under 30 years of age. Prepaid plastics, including the national government’s food card, grew 124.4% last year.
For its part, Afluenta offers collaborative loans for consumption and MSMEs. It allows individuals to request personal and commercial loans from $20,000 to $1,000,000 in 12, 18, 24, 36 or 48 months. The applicant indicates the amount of money they want and the period in which they would be willing to pay it.
According to a study by the Argentine Fintech Chamber between 2018 and 2020, the number of fintech startups in Argentina has more than doubled, going from 133 to 268.
Fintech helps alleviate capital financing problems so that SMEs can grow. Argentina is the first Latin American country to have technical interoperability in QR codes. That is, with a bank wallet you can pay for a QR from any other entity . Before the coronavirus, it was estimated that in Latin America there were 40 million businesses that did not accept digital payments. According to the BCRA Retail Payments Report, payments with immediate transfers through virtual wallets tripled between 2019 and 2020. In 2020, 189 million operations were carried out with money in these accounts. The year-on-year growth of 224% positions this instrument as the one that grew the most in the year. The share of total retail payments is 4.4 percent.
According to the BCRA Retail Payments Report, payments with immediate transfers through virtual wallets tripled between 2019 and 2020
According to a report by Finnovista on the map of the fintech ecosystem in Latin America as of 2020, the main segment of the sector is digital payments and remittances, with almost a quarter of the total companies (24.4%). It is followed by loan companies (17.8%) and financial solutions for companies (15.5%).
The participation of fintech companies in Argentina in the different segments shows leadership in Insurtech (insurance), Financial Infrastructure, Neo Bank (100% mobile banking experience, by partnering with a traditional bank) and Challenger Banks (those trying to obtain a new license bank to become a new entity). Without a doubt, Argentina is building a digital universe in the areas of finance, but its progress in infrastructure and regulatory framework finds a permanent conspiracy in economic regulations, tax burden and informality, legal uncertainty with sudden changes in laws and macroeconomic instability.