Digital Transformation in LatAm: Innovation opportunities, AI nascency, Open Banking success stories

By Puja Sharma

Leading early-stage venture capital firm Atlantico has released the 2023 Latin America Digital Transformation Report.

Now in its fourth year, the annual Report has become the authority on LatAm’s transition to the digital economy, hailed by tech founders including Reid Hoffman (LinkedIn), Max Levchin (PayPal), Daniel Ek (Spotify), Tony Fadell (Nest, iPod) and Mike Krieger (Instagram); and by VCs including Marc Andreessen (a16z), Marcelo Claure (ex-SoftBank), Chris Sacca (Lowercase) and Josh Wolfe (Lux).

Last year’s Report was accessed by an estimated 100k decision-makers around the world, and was reported on internationally including by CNN, the Financial Times, Forbes, Reuters, TechCrunch and the Wall Street Journal.

Julio Vasconcellos, Atlantico’s Founder and Managing Partner, said, “As our Report enters its fourth year, we again see reasons for regional optimism. The past half-decade has witnessed considerable growth in venture funding and startup activity, hinting at a prelude to more significant shifts. Fintech serves as a notable example, offering a glimpse into untapped potential across sectors. For instance, Brazil’s PIX, the world’s fastest growing payment network, has swiftly superseded conventional transactions, illustrating the realm of possibilities. Meanwhile, Latin America’s tech landscape, currently contributing a mere 2% to the region’s GDP, presents opportunities awaiting further innovation. In contrast, India’s and China’s tech landscape represent 11% and 20% of their GDP respectively. This divergence sets the stage for the imminent room for tech growth in Latam”.

The 2023 Latin America Digital Transformation Report

As with previous years, the 2023 Report leverages new private company data to create an exhaustive analysis of the macro and tech sector in Latin America, including trends in venture funding, exit valuations, tech market caps as GDP %, consumer habits and smartphone, FinTech and eCommerce penetration, alongside new themes such as AI’s adoption and impact. Additionally, through original surveys, it outlines how founders and technical talent view current market conditions, and the movement of human capital.

• The LatAm Opportunity– Latin America punched above its weight in 2022 with IPOs and M&A exits; Brazil’s Nubank ($41bn) dwarfed India’s top exit, Flipkart ($21bn). LatAm is reaching an inflection point with public tech companies and unicorns have greatly scaled and increased in number in the last five years. FinTech drives tech investment.
• Tech’s market cap invites value creation – Despite exponential investment and startup growth in the past decade, the market cap of tech companies represents just <2% of LatAm’s total GDP, compared with India (11%), China (20%), the US (64%); matching these could yield regional value creation of up to a trillion dollars.
• LatAm wins in USA vs. China– Latin American economies are benefiting from the geopolitical trade war between the US and China, as Chinese tech giants like TikTok and Shein pour investment into LatAm markets, US funding is pulled out of China and reinvested in LatAm tech, and US manufacturing relocates from China.
• Tech sector confidence soars after 2022 fears– The Latin American tech community is much more bullish about the sector’s prospects than last year, with tech a coveted employment area despite layoffs in the last 12 months.
• AI takes off, promises social good– While still nascent in LatAm, AI is entering a period of extreme growth, and pioneering startups have already achieved extraordinary results in closing socioeconomic gaps in healthcare, education and access to financial services. Half of Latin American tech founders expect AI to heavily impact their sector.
• High cellphone penetration drives internet use, eCommerce– Latin Americans are now among the heaviest internet users in the world; meanwhile e-commerce has grown rapidly, driven by high cell phone penetration as well as increased consumer trust in online transactions and improved logistics.
• Pix outgrows cash, credit, debit– Pix, the instant payment FinTech platform, is now more widely used than cash, credit or debit cards for transferring money in Brazil – a phenomenon never seen before anywhere in the world, and outstripping even India’s UPI.
• Open Banking’s first success story?– While Open Banking has largely been branded a failure in Europe, its implementation in Brazil is on track to be the most successful ever.