Fintech was the 1 sector of venture capital investments in Latin America last year, and experts are estimating that the LatAm fintech market will exceed $150 billion by 2021. Why is this market suddenly growing so rapidly? The answer lies within the unique fintech startups that have sprouted throughout the region in recent years.

In the past few years, over 300 fintech startups have been born in Mexico alone, coming in just second to Brazil, which boasts nearly 400 startups in its own fintech sector. Not only have these startups found huge success in the region, but many of them have become unicorns — meaning that they have reached $1 billion in valuation.

And from new unicorn fintechs in Mexico to Brazilian fintechs going public on the New York Stock Exchange, the growth in this industry won’t be slowing down anytime soon.

Why is so much happening in the fintech landscape in LatAm over the past few years? What are the driving forces for this? Here are three reasons many fintech startups have become unicorns in LatAm in the past two years, and are helping shape a new way of doing things in the region:

A local payment environment unlike any other

The local payment environment in Latin America is a chief reason for the arrival of fintech startups. Its challenges are creating huge opportunities for fintech solutions to come into play, address these challenges and thus shape the payments landscape in LatAm.

These Latin American Startups are Revolutionizing the Fintech Sector

Currently, the LatAm financial sector can seem a bit overwhelming for incoming businesses from other countries. Why? Firstly, the region boasts a number of unique online payment systems among different countries, and the addition of unique cash voucher payment options among different countries makes it even tougher for international and ecommerce businesses to navigate.

Latin Americans also strongly prefer to pay in installments for any purchase — not just the big ones. This means that Latin Americans have created a culture of paying in installments for anything as small as buying groceries to bigger purchases like home appliances or even larger costs, such as paying for a trip.

In the first half of 2018, 48 percent of ecommerce purchases were paid with installments in Brazil. Whether the purchase is large or small, Brazilians and other Latin Americans are accustomed to having the option to pay in installments, which new businesses and ecommerce shops in the region must adapt to.

Old banks meet new fintechs

This local payment environment has made it a challenge for international banks to bring their services to Latin America, and regional banks have been seen by many as a barrier of entry to financial inclusion for many residents of the region due to their high interest rates and fees.

However, these regional banks are starting to notice and adapt to the rise of fintechs. According to a report from last year, 85 percent of banks are considering fintechs as potential partners, and another six percent expressed interest in acquiring their fintech competitors.

The new trend of fintech-bank partnerships has already started to gain traction. Two years ago, Mexico’s largest bank acquired a fintech startup to increase its range of online payment solutions, and also in 2017, one of Colombia’s largest national banks created its own digital-only neobank, allowing its members to withdraw cash from their accounts at the bank’s branches and ATM locations. And over in Brazil, the federal government has lifted some banking regulations which will make it easier for fintechs to come to the region.

Going back — to get to the future

In Latin America, the innovation in payments isn’t about reinventing the wheel to create the ultimate digital wallet — it’s simply about doing the basics in a new way in order to overcome the region’s unique payment landscape.

The fintechs that have been arriving to the region are creating core businesses that address the region’s issues with traditional payments, by creating solutions that do the basics in a new way so people can have access to them.

So far, the greatest innovations that consumers in LatAm are seeing are just different and innovative ways of doing the old. Nubank? Their product is a credit card and bank account. EBANX? They connect consumers and businesses through payment solutions that are well-known, like cash vouchers and credit cards. PagSeguro?

They are offering acquire services to the underserved small businesses that could not access those services previously. And StoneCo, a Brazilian acquirer which sells its solutions to both merchants and payment service providers, is gaining attention from well-known investors such as Warren Buffett.

All of these fintech players have something in common: They understand the major financial and payment challenges that are facing LatAm, and are dedicated to working out those challenges and allowing people to participate in the economy in their own way — whether it’s paying with cash, credit cards or installments. With little competition in the region and a market that is eager and ready for these new solutions, the moment for businesses to expand to Latin America is now.

Ariel Patschiki, for Payments Journal. Ariel is partner and product director for end user at EBANX, an end-to-end local payment solution in Latin America.