Colombia has an estimated population of 49.07m people with 54% of those aged 15+ not
having a bank account. The country has an internet penetration rate of 65% in 2018 and
95% of the adult population have a mobile phone. According to the Global Microscope
2016 report, Colombia has a favorable environment for doing business to enable financial
inclusion. However, financial services are expensive and approximately 90% of
Colombians still prefer to pay with cash.
There are 124 identified FinTech startups in 2017 (an increase of 61% compared to 2016), 3rd
highest in Latin America after Mexico and Brazil. The leading FinTech segment was
“Payments and Remittance” with 30% of FinTechs in that sector. Taking 2nd and 3rd place
are Lending and Enterprise Financial Management at 18% and 14% respectively.
Greater consumer confidence along with the easy to use and quick electronic payments
services were one of the main driver for the high growth rates of the Payment & Remittance
segment. In 2017, it is estimated that 9.6% of the population prefer carrying out transactions
electronically and approximately 64tn pesos were mobilized in payments and online
A survey conducted by Finnovista in 2017 highlighted that 32% of startups operate beyond
Colombian borders as compared to Mexico and Brazil where only 10% of the startups operate
overseas. In the same survey, it was noted that 45% of the startups have a focus on targeting
the unbanked or underbanked population and SMEs.
There is no clear FinTech regulation in Colombia. However, the inexistence of a Fintech
regulatory environment does not mean there is not applicable law to Fintech companies. The
Colombian legal system still applies to any company that must comply with the Financial
Protection Regimen, the Financial Habeas Data and Data Protection dispositions, Colombia’s
Tax Regulation for digital industries, or Colombia’s Administration System for the Prevention
of Money Laundering and Financing of Terrorism(SARLFT).
Due to the nature of FinTech which involves Financial services and (communication)
technology, FinTechs would be regulated by multiple different government agencies and
sometimes regulations would be conflicting.
The government presented a bill for FinTech companies (particularly crowdfunding platforms)
in 2017 but it did not gain support from the FinTech companies and the bill was stalled.
Instead, FinTech companies are now self regulating and abiding by a responsibility code
created by the Colombian Association of Technology and Innovation Companies.
F O C U S
In 1H2017 Colombian startups attracted US$67m in funding in 6 deals, compared to 13
deals in 2016 worth US$26m. TechCrunch estimates that VC investment in the Latin
American region was US$1.1bn in 2017 compared to the average of US$500m each year
for the past 5 years.
Industry players like Ruta N and Capitalia Colombia have been trying to stimulate growth
of the ecosystem by providing opportunities for VC and angel investor education. The 2
organisations, in collaboration with Odiseo and Angeles Inversionistas, set up an event,
Smart Capital in 2017 which drew over 600 individuals including VCs, corporates, family
offices, endowments, impact investors, angels, and entrepreneurs.
There is IT talent shortage in Colombia with an estimated shortage of 70k IT talents by
2019. It is estimated that 95% of engineers in Colombia are already being employed in
2018 and salaries have increased between 20-30%.
The legal system is biased towards the employee. The cost of running a FinTech in
Colombia may increase due to the talent aspect of the business.
According to “IT Wages in South America”, a Nearshore Americas study, companies also
have to consider total cost of employment, which encompasses a “loaded wage” including
vacation, paid holiday leave, severance pay, and bonuses, and can add anywhere from
40% to 100% to the cost of employing an IT professional.
An employer is expected to pay US$44,276 per year in Bogota for a front-end developer
compared to US$25,800 and US$25,500 in Sao Paulo and Buenos Aires respectively.
The government have launched a program called ”IT Talent” which aims to reduce the
talent deficit. Between 2010 and 2014, the Ministry of Technology spent US$153 million
on this program, but will spend another US$30 million before the end of 2018.
Colombia is also offering 80% of the training cost for people pursuing a career in
information technology. According to the ICT Ministry, 9,400 students signed up for this
program in 2017.
Furthermore, over the past two years, the country has trained more than 6,000 people
under its ambitious program known as “Plan Vive Digital”, which is slated to last until the
end of this year.
VC/PE in the region
•Colombian FinTechsare driving financial inclusion and SME finance
Global Emerging Markets