Friday Briefing:”Doing more with less money”: Fintech investment slides backwards

May 27, 2022

#TopStory 🔝

“Doing more with less money”: Fintech investment slides backwards

The cooling of Latin America’s investment climate is palpable. This time last year, the fintech industry’s mindset was grow at all costs but over the course of 12 months it has changed drastically, with financial startups adjusting costs and internalizing the view that raising fresh capital will be more difficult in the coming months.

The drop in the valuation of unicorns making their debut in international markets during the last year is having a negative effect on the rest of the market; and the war in Ukraine has complicated an already challenging
macroeconomic environment.

“Investors are feeling uncomfortable and they prefer to wait for a better scenario for investing,” Jorge González, managing partner of the firm G2 Momentum Capital in Mexico, tells iupana.

That discomfort hasn’t yet been fully reflected in the amounts of capital being raised by fintechs: the flow of capital is expected to stagnate in the coming months, in the best-case scenario.The Latin American Association of Venture Capital & Private Equity (LAVCA) said investment reached US$5.5 billion in the first quarter of this year, 88% more than
in the same period of 2021. Venture capital accounted for 50% of investment in the region.

However, the figure is well below levels reached in the preceding two quarters: US$9.3 billion in the third quarter of 2021 and US$9.2 billion in the fourth quarter.

“Companies that raised capital three or four months ago will have a period of growth in the near future. However, those who are looking for funding will have to settle for smaller rounds. In addition, they’ll need to reduce their expansion plans or the creation of new products,” adds González. His comments are in line with those of other market sources consulted by iupana.

“Obviously, companies are going to have to modify their
strategy—they’ll have to do more with less money. Regarding future investments, investment funds are going to be more cautious and demanding,” he said.

To delve deeper into this topic, we’ve put together a panel of top investors to discuss the investment climate going forward. Don’t miss it. 

Buenbit makes deep cuts in face of capital drought

Against the backdrop of tighter access to capital, the news of layoffs at Buenbit in Argentina
and Klarna in the United States may be the start of a wave of industry cutbacks.

Buenbit, a cryptocurrency exchange, fired one hundred employees—equivalent to half its workforce—citing the worsening global economy. It also acknowledged that it won’t be easy to raise fresh financing.

“Phenomena outside the crypto economy are affecting us like any other company,” the firm told iupana via email  “Startups like Buenbit, which had plans to raise more capital to continue growing, are facing a changing macro situation and frightened investors.”

The fintech sector is braced for more staff reductions and a freeze on hiring processes.

Buenbit added: “We’re forced to be self-sustaining and therefore we have two options: continue as we are, begging some investor to give us capital to continue sustaining the structure or risk of having to lay off 100% of the team; or do what’s necessary to sustain the company without external capital, even if this means reducing almost 50% of the team. We’ve chosen the second option.”

#Fintechs vs cards in Chile 🥊

PayU, EBANX and dLocal succeeding using legal measures to block the introduction of new commercial conditions such as fee rates by Visa, Mastercard and American Express, saying the changes would make their operations in Chile unviable.

The payment service providers (PSPs) argue that the proposals would force them to pay higher fees to card companies when they process payments for a service from a foreign company, such as Netflix or Uber. Mastercard says the objective of the new rules isn’t commercial but rather seeks to prevent fraud or money laundering in cross-border operation

#Regulation 📜

[Exclusive] Paraguay readies its innovation hub and fintech regulation

Paraguay is developing a digital innovation hub—Distrito Digital—where it also wants to draw up ad hoc regulatory proposals. It’s already receiving application

Rio de Janeiro law may curb contactless card payments

A law passed by Rio de Janeiro state’s legislative assembly would add new requirements to contactless payments, making them unfeasible, according to a card operator body. The bill has yet to signed into law by the state’s governor.

Brazil moves to share data under open finance

Brazil laid the legal foundations for the sharing of data, with user consent, between banks, fintechs, insurers and the rest of financial industry.

In the coming days we’ll be analyzing the implication of the central bank’s initiative, which is expected to spur the creation of new business models.

#Investments  📈

Brazil’s Marvin closes A round for US$15m

Marvin, a Brazilian accounts receivable payments fintech, raised its third round of funding just over a year after it was founded. Investment was led by Canaan Partners of the U.S. and included the participation of several angel investors. The firm plans to hire new talent and promote its product to its target audience: entrepreneurs and merchants.

Duemint raises US$1m in seed round

Duemint, a Chilean platform for automating collection processes, closed its first financing round, raising US$1 million from Chile Ventures. It plans to use the proceeds to strengthen its financial service offering and prepare for a planned expansion to Mexico.

#Alliances 🤝

Thunes and Movii offer cross-border payments in Colombia

Singapore-based payments platform Thunes teamed up with Movii to offer instant international payments through the Colombian fintech’s digital wallet. Likewise, Colombians will be able to receive payments from the 127 countries where Thunes operates.

#iupanaExclusive 🔥

Digital payments in LatAm are increasingly making their way into spaces still dominated by cash. One of them is public transport, where aim to reach critical mass:

• Transport brings together actors such as payment technology providers, fintechs, banks, businesses and governments, as well as millions of users. As a result, it holds great potential for the digital payments industry.

• In Mexico City, more than 8 million users use the public Metro system daily. Mercado Pago has begun activating mobile point-of-sale (POS) terminals to
  allow small businesses to recharge mobility cards.

• Massifying electronic payments requires help from regulators, says Rapyd.

Find out more in this week’s exclusive report.

Over and out

That’s it – you’re up to date! Wishing you a great weekend from the iupana team.

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