Latin America a potential next market for startups in South-east Asia
Latam's median age is 30.9 years old, similar to South-east Asia's 30.4 years, a report by venture capital firms Saison Capital and Valor Capital showed. This is an important metric, said Looi Qin En, a partner at Saison Capital, which is the corporate venture arm of Japanese financial services provider Credit Saison.
'Thirty years old is not just a young population – it is a young population that is actually employed and has growing disposable incomes,' Looi told The Business Times.
Latam also has a growing middle class which is spending more on goods and services, driving demand for everything from housing to technology. Brazil, for instance, has had its spending increase 5.2 times to US$1.6 trillion from US$303 billion, the Saison and Valor report indicated.
Besides demographics, both Latam and South-east Asia have strong regulatory support for financial services, smoothing the way for innovation in the sector.
For example, there are instant payment systems such as Fast and Secure Transfers in Singapore, PromptPay in Thailand, and Pix in Brazil. Some South-east Asian startups, including data analytics platform Credolab and financial software provider Moneythor, have also noticed the potential and set up shop in Latam.
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Indonesia and Brazil
Indonesia and Brazil are the largest economies in South-east Asia and Latam, respectively, and these markets are where the biggest potential lies. They also have the largest populations in their respective regions, with Brazil's 2024 gross domestic product standing at US$2 trillion and Indonesia's at US$1.4 trillion.
The average daily time spent online was 553 minutes in Brazil and 462 minutes in Indonesia, based on Saison and Valor's report.
Looi noted that despite 'all this innovation', there are still several gaps – 'and a lot of the gaps are the same'.
The lack of access to credit, for example, is an issue in both Indonesia and Brazil, priming fintech for growth in these regions. In particular, micro, small and medium enterprises (MSMEs) as well as retail customers face difficulties with these countries' credit rating systems.
'Essentially, what that creates is a huge opportunity to go in and solve the same problems using a lot of the same products,' said Looi.
However, South-east Asia and Latam are typically not viewed as potential expansion markets for each other, possibly due to an absence of direct flights between the two regions.
Still, Saison Capital recognised their similarities, leading the firm to open offices in Brazil and Mexico. Besides hiring local teams, it has set aside US$100 million for investments in each market.
Like South-east Asia, Latam is also diverse. For example, while Spanish is the official language in most Latam countries, it is Portuguese in Brazil, and each market also has its nuances. Understanding these differences and thinking regional is essential for startups to find success there, said Bruno Batavia, principal at Valor Capital.
'In terms of addressable markets, they already have to think about regional strategy in Latam – starting, for instance, in Columbia, then Peru, then Argentina. They already have to start their business in different countries,' he said.
Both Saison and Valor hope to facilitate more conversations and understanding between the South-east Asian and Latam markets.
In particular, Saison Capital 'can act as the bridge... because we are committed to each market in the sense that we are not just tourists – we don't just have a small branch office and two people there', said Looi.
As for Latam startups crossing over to South-east Asia, Batavia notes that this is already happening organically, rather than venture capital firms like Valor pushing their portfolio companies to make the leap.
Brazilian digital bank Nubank, for instance, last year invested US$150 million into Tyme, leading the latter's Series D funding round, which raised US$250 million.
Tyme is a digital bank which operates in the Philippines via kiosks rather than branches to serve its target customers. Its regional expansion plans include offering credit products to MSMEs in Vietnam, and acquiring a bank to start operations in Indonesia.
'Maybe the next frontier could be South-east Asia, because there's a lot of opportunities and similarities,' said Batavia.
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