Receive Just Rewards

Latin American banks still view payments providers as rivals, bucking a global trend. Managing remittances may turn competition into a lucrative collaboration.

Vincent Chamasrour
Vincent Chamasrour – Customer Value Director, Americas – Temenos

If any region deserves a blue ribbon for leapfrogging generations of technology to improve the quality of life, it’s Latin America. 

Ask anyone in the region who made the jump from using a rotary phone to a Motorola Startac in one afternoon. 

Or anyone who went from paying for goods and services in cash to PayPal in a day’s time span. 

That trend is still going strong, even stronger today where financial services supported by digital banking are involved. 

Latin America’s cloud computing market, for example, should grow by US$18.7 billion during 2022-2027 period, accelerating at a CAGR of 16.32%.1 

Furthermore, Latin America is the fastest growing SaaS and cloud market in the world, expanding at a robust 26% per year through 2026.2 

Yet despite the region’s willingness to adopt new technologies, a lack of financial inclusion, remains a consistent headwind.  Multiple studies carried about by multilateral lending institutions have found that for decades, about half of the population has been left out of the formal financial system.

Some research shows that 70% of the region can be classified as unbanked (i.e., no checking or savings accounts) or underbanked (i.e., they have bank accounts but do not have access to credit or loans).3 

Bottom line is many still run their lives and businesses with cash, though they’re not without help. Enter remittances, money that overseas workers send to friends and families back home.

Remittances received by Latin American and Caribbean countries hit an estimated $155 billion in 2023, according to the Inter-American Development Bank, up 9.5% from the $142 billion received a year earlier.4  

To put that figure into perspective, $155 billion is more than double the size of the Uruguay’s nominal Gross Domestic Product and not far behind the GDP of Kuwait. Today, digital banking is making it quicker, easier and cheaper to handle the flow of remittances, and banks and payments players are vying for business, fueling competition that is very unique to Latin America. 

According to an Economist Impact survey of bankers conducted in conjunction with Temenos, 41% of bankers view payments players as their biggest competitors in the next five years, when taken from a global point of view. Specifically among Latin American bankers, that percentage shoots up to 56%. 

The study also found that 36% of Latin American bankers believe international remittances is the top area where non-traditional entrants will gain market share. (In second place, 30% said investments (self-executed or robo-advisory) followed by SME lending (24%). Corporate lending and trade finance tied for fourth place at 18%). 

It’s clear, then, that remittances are reshaping the competitive landscape in the Latin American financial sector, and it’s only natural for new players to bring new technologies and new methods of conducting business. 

That’s not something banks should fret—it’s something that will bring fresh opportunities. 

Take embedded finance

Embedded financed is basically inserting access to credit in different stages of a buyer’s journey, especially in places where purchases are not normally made (i.e., having the option to buy insurance for a good or service you bought on your phone). 

In essence, banks partner with businesses and fintechs to ensure they’re always on hand to enable purchases whenever necessary, thus making banking a constantly available convenience instead of something you need to “do” to make something else happen. 

According to the EIU Impact study, 86% of Latin American bankers believe banking will become embedded in consumers’ lives and businesses’ value chains, and that’s where opportunity can be found. 

The market for embedded finance could hit $7.2 trillion worldwide by 2030.5 

Yes, that’s trillion, with a “t.” 

Factor remittances into that space and the opportunities can be mind boggling. 

Remittances are one of the largest sources of foreign income for lower- and middle-income nations, if not the largest. In fact, they often outpace other sources such as foreign-direct investment and aid. That means they fuel economic development, and when economies develop not only in size but in financial and technological sophistication, the demand for new financial products rises. 

Remittances are enabling economies to do just that. 

Globally, remittances to low- and middle-income countries grew an estimated 3.8% in 2023 to hit $669 billion, according to the World Bank.6 

They fund current account and fiscal deficits, shoring up economies in ways that support banking sectors in the process. Money is moving around the world, and winning financial institutions will empower those who receive remittances to invest and spend wisely.  

Do likewise. 

Invest and spend wisely in digital banking. 

Empower those who are receiving a little help from abroad on their journey to become prosperous members of the formal economy.  







Vincent Chamasrour
Vincent Chamasrour – Customer Value Director, Americas - Temenos