Peru’s fintech industry has been growing consistently these past years, surging to 171 fintech companies operating locally, as of September 2021. The figure represents a 16% from 2020, and an annual average growth rate of 20% over the last seven years, according to a new report by EY Law.

Despite notable growth, these figures indicate that Peru’s fintech industry remains fairly nascent compared to regional leaders Brazil and Mexico, but a growing economy, rising affluent middle class, large population of unbanked and high mobile penetration rate are setting the stage of strong growth, according to a new paper by Swiss agency Switzerland Global Enterprise (S-GE).

Peru’s informal and underbanked sector represents more 70% of the domestic workforce and over 90% of SMEs, and the financial sector, which is dominated by a few legacy banks, has been slow to innovate, the paper says.

At the same time, financial inclusion remains low. In Q1 2020, the percentage of adults with at least one financial product was barely above 43%, according to data from the Asociación de Bancos del Perú (the Association of Banks of Peru, ASBANC). This represents a huge opportunity for fintech companies.

Peru’s fintech opportunities

An analysis of each fintech segment by S-GE suggests that opportunities exist across all major segments.

In deposit and lending, the paper notes that the lack of alternative financing options with quick and short approval times and reliable credit scoring systems represents an untapped opportunity.

In payments, the boom in e-commerce and food delivery apps during the COVID-19 lockdown will continue fueling the growth in mobile payments. In 2020, the use of mobile payment tripled and the use of mobile apps for payments quadrupled, the paper notes, a shift in customer behavior that’s projected to persevere post-COVID-19.

Banking-as-a-service (BaaS) and banking infrastructure is another segment poised for growth. This will build on rising demand from legacy banks for solutions to integrate innovative digital financial services.

According to the EY report, the Peruvian fintech ecosystem is dominated by companies in the lending space (41 companies), followed by payments and wallet services (27), small and medium-sized enterprise (SME) finance management (21), and personal financial management (14). Other segments represented include techfin (9 companies), cryptocurrencies (9), crowdfunding (8), credit coring (6) and insurtech (4).

Government initiatives to boost fintech growth

This year, the government has announced several initiatives set to boost the fintech sector.

The Multisectoral Strategic Plan (PEM) of the National Policy for Financial Inclusion (PNIF), for example, was introduced by the Ministry of Economy and Finance (MEF), in coordination with nine state-run agencies, to improve financial inclusion.

The plan includes 30 measures, including financial education programs and plans, training for the use of digital tools by entrepreneurs and traders, promotion of inclusive financial products and services, the DNI (ID card) Account Implementation Plan, and development of telecommunications infrastructure for expanded financial services.

The plan seeks to increase financial inclusion to 75% by 2030.

In May, the country introduced crowdfunding rules, setting the foundation for the sector to thrive. That same month, a draft legislation was published to set up a financial regulatory sandbox that would allow the testing of innovative solutions.

Just this week, the Central Reserve Bank of Peru’s (BCRP) president, Julio Velarde, unveiled plans to develop a central bank digital currency (CBDC). The project includes involvement of other central banks around the globe, including Singapore and India.

Featured image credit: Photo by Agnieszka Mordaunt on Unsplash