Category: Latin America Startups and Investing

How to Pay Bills Across Latin America: Problems and Opportunities

You would think that in 2018 you could pay almost any bill online. But that’s not the case in many Latin American countries, although the process is becoming easier.

While companies such as Xoom, Multicaja, and Nequi are streamlining online payments in Mexico, Chile, and Colombia, respectively, many people still find themselves queuing up in three-hour lines to pay their utilities, credit cards and other bills every month.

One expat in Mexico explained how he used five different payment methods for his electric bills over ten months because the rules changed each time.

So how do people keep track of their payments and wade through the bureaucracy each month to pay their bills? What happens if you send a payment late or the providers send the bill to the wrong tenant? It depends on the country.

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An Overview of the Insurtech Industry in Latin America

The insurtech industry worldwide received over US$2.3B in investment in 2017, a 36% increase from the year before. From 2014 to 2017, the Latin American share of the insurtech market grew from 1% to 7.6%, and the number of insurtech startups increased by 114% in 2017. This uptick is logical as insurance plays a vital role in stabilizing emerging economies and minimizing risk.

Latin America is underinsured, despite steadily growing incomes over the past two decades. Currently, insurance penetration, calculated as the ratio between insurance premiums written and GDP, hovers between 2-4% across the region compared to 6.2% globally and 7.3% in the US, the world leader, in 2015. Latin America still lags behind the rest of the world in insurance coverage.

As Latin America’s most developed economy, Chile is also the most developed insurance market in Latin America. Earthquake insurance is required for all mortgages and after Chile’s 2010 earthquake, a group of mostly international insurers paid out claims that reached around 4% of Chile’s GDP.

Compared to the rest of the region, Chile has a relatively open and well-regulated insurance industry. While Brazil has become a top player in insurtech, the insurance industry in Brazil is mired in complex regulations. Still, growing middle classes across Latin America have yet to invest heavily in comprehensive insurance policies for a host of reasons.

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JT Li’s Journey From China to Chile and Lessons Learned From Crossing Borders

JT Li joined the Magma Partners team in our Santiago, Chile office earlier this year. As part of her training, she listened to much of the Crossing Borders podcast and wrote up some of the most interesting things she learned from the entrepreneurs and investors I talked with. Here’s JT’s story about how she went from  the south of China to Santiago, Chile.
Three month ago, on my 25th birthday, I took a flight from my hometown of Jieyang, China and arrived in Santiago, Chile two days later, after 32 hours in the air, and joined the Magma Partners team.
I never imagined that one day I would be working in South America, let alone Chile. But now when I look back, everything makes sense. During the first 18 years of my life, I followed a very traditional path. I lived with my family in Jieyang, a small (by Chinese standards!) city of 6M in Canton where I was born. I studied hard and got good grades. Next up university. After the extremely competitive entrance exam, I was accepted into Beijing Foreign Studies University and hopped on a plane to study economics.
It was my first time away from home, 1100+ miles away from my home town. I had a great year meeting my fellow students from different backgrounds and experiencing huge differences between southern and northern China in terms of languages, food and lifestyles. After meeting new people from different places, I was hooked. I wanted to see more. After my first year, I started traveling and haven’t stopped since.

My first stop was Bulgaria, a small country in eastern Europe, where I for an cultural exchange program for 6 weeks. Next, I flew south to Queensland, Australia for a semester abroad, where I studied management and learned a bit of Aussie English. After I finished my undergraduate in Beijing, I went back to Australia, settling in Sydney for a Masters Degree in Management.

I knew I wanted to go abroad again. One day, I was handed a list of 28 universities to pick from for my exchange semester. Chile immediately stuck out because of their natural beauty and because nobody I knew had been there. Chile and Brazil were the only two South American countries on the list. I remember thinking, “hmm Chile is definitely far enough away, and it seems safer than Brazil,” so I applied!

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How MercadoLibre Dominates Latin America’s E-commerce Industry

Over the past five years, Amazon has slowly expanded into Latin America, testing the waters in Brazil, Argentina, Chile, and Mexico.

Despite the Seattle-based giant’s explosive success in the United States, Amazon has not yet made inroads as quickly in most of Latin America.

Part of the challenge is that Latin America already has its own e-commerce giant: MercadoLibre.

Founded in 1999 by Hernan Kazah and Marcos Galperin in Buenos Aires, Argentina, MercadoLibre is now the e-commerce site of choice in Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Ecuador, Guatemala, Honduras, Peru, Panama, Uruguay, and Venezuela.

In Latin America, 47% of online shoppers buy on MercadoLibre while only 17% use Amazon. In Mexico, where Amazon offers similar services to the US, 38% of online shoppers still use MercadoLibre while just 21% use Amazon.

Source

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