The coronavirus outbreak could drive financial inclusion in Latin America, as governments look for agile partners to distribute state aid and large segments of the informal economy grapple with restricted access to cash.
In January, the newly elected Argentine government had passed stricter regulation for financial technology companies. But with the onset of the coronavirus pandemic, Alberto Fernández's economic team now looks to partner up with them in order to hand out a 10,000-peso emergency benefit to the country's unbanked informal-sector workers. To do so, virtual wallets such as Ualá and MercadoLibre Inc.'s Mercado Pago were authorized as disbursement channels. "It's time for the fintech slogan of financial inclusion to truly come into play," Argentina's Fintech Chamber President Ignacio Plaza told S&P Global Market Intelligence. "If the government keeps relying on us to help them distribute this aid through fintech wallets, people will start to use them more and more and become acquainted with their practicality and power," he added. In Brazil, Nubank became a leading case of a challenger bank that has become a key player in the banking sector. Also, Brazil's central bank has recently allowed fintechs to issue credit cards and to receive financing from state-owned development bank Banco Nacional de Desenvolvimento Econômico e Social, to compensate for the near-paralysis in capital markets, which is the most common source of funding for fintechs. Instead, mixed partnerships are surfacing on state and federal levels. "Nubank is well prepared to face [the coronavirus] in terms of financial, tech and human resources, offering 23 million customers an ongoing, stable and transparent service. Since the beginning of the pandemic, the rate of digital account creation remains stable, growing day by day," the bank said in a statement.