the Latam Tech Report 2024

A look into LatAm's tech future from the eyes of its builders

OPENING LETTER

It's the third year of The LatAm Tech Report. And once again, we see the expansion of Latin America. From Tijuana to Tierra del Fuego, our GDP now surpasses US\$ 7T, as we're inching closer and closer to 700 million inhabitants.

But we aren't dedicating this year to expansion.
We're dedicating it to beginnings.

Each Latin American country, startup, and founder is carving their own path of validation, traction, scale, and maturity. Throughout this report, we spotted asymmetries across regions, sectors, ideas, and entrepreneurs. Banking, payment methods, software, ecommerce, regulations: cross frontiers and you'll find a different opportunity story at every corner. Understanding local nuances is a privilege we have as local founders and investors.

Yet as we read between the lines, we also found commonalities. We all see how much we still need to do to bring efficiency to fragmented sectors; but we also see just how much we can leapfrog if we're smart about what we have in our hands – from WhatsApp messages to AI models.

We hope here to value our differences while bonding through similarities. A big one we love to state time and time again: LatAm founders just find a way to make it work, due to their capacity to transform challenges that seem as insurmountable as Aconcagua into opportunities as vast as the Amazon river. Add into that journey a long startup winter that taught us all to be even more resourceful, and you see founders who are just a force to be reckoned with.

You'll find plenty of them in the next pages – and many more in your travels across Latin America. Hit us up when you're around, and Vamos LatAm!

The Latitud Team

OPENING LETTER

The LatAm Tech Report looks into Latin America's tech future from the eyes of its builders.

Through the Latitud Founder & Investor Survey 2024, dozens of early-stage founders (up to Series A), investors, and operators across the region shared their perception of the fundraising environment, the maturity of their markets in LatAm vs the world, the adoption of artificial intelligence, and segmented trends, opportunities, and challenges. This ecosystem perception was paired with a look at LatAm's most recent data and deeper conversations with another 50+ founders and investors.

The LatAm Tech Report 2024 starts with the state of the general startup market in LatAm. We then explored four segments in more detail: Fintech, SaaS, E-commerce/Logistics, and (of course) AI. We asked ourselves three main questions:

The Trends: what's changing and how are startups leveraging it?

Taking into account market movements and the state of tech adoption of each sector, we highlight the macro and micro trends that already presented sizeable growth and will continue to do so.

The Opportunities: what can we and startups expect in the medium term?

For founders and investors looking at 3+ years, we have also explored future movements in each sector: new consumer behaviors and demands, remaining underserved markets with pressing needs, and gaps that can turn into opportunities in the hands of the right entrepreneurs.

The Challenges: how should we prepare?

We also present some present and future challenges that founders and investors in each sector will have to overcome to see traction, expansion, and maturity.

Latitud is the first-check partner for LatAm founders building good sh*t. We invest in top emerging founders from ideation to conviction.

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☑BHub cometa ELEVV

finkargo D hyperplane ipomelo (Exit to Nubank)

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Introduction: The LatAm Startup Market in 2024

The Future of Fintech

The Future of SaaS

The Future of E-commerce and Logistics

The Future of AI

Team, Data & Insights Partners, For More Content

THE LATAM TECH REPORT

Introduction: The LatAm Startup Market in 2024

Latam added one unicorn this year: Brazil's QI Tech

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V Facily F frete.com GympassOhotmart food lofr
Loggi 仓 Meroado B OoonUbank olist madeiramadeira PagSeguro OPiSMO QITECH E QUINTOANDAR stone UnIco 7 vtex WIE

The startup winter continues in 2024 YTD

2024's slowdown, even in relation to the also tough previous year, was somewhat expected. Many funds focused on raising capital this year, limiting their ability to invest.

Venture capital funding to LatAm startups, 2019 to Q3 2024 (\$M) Source: LAVCA

We see a continuation from last year in 2024, yet with a significant uptick in later rounds and a more diversified mix of global investors in the second half of the year, as seen in the rounds of QI Tech, Cayena, and Ualá.

We’re entering a decreasing cycle of rates in the US, which should positively impact capital flows to Latin America. Yet there’s a lagging effect from public to late-stage private to early-stage private markets, not to mention a lack of liquidity.

And so, in LatAm we’ll see not a cyclical but a secular growth, driven by fundamentals: founders doing their job of building world-class companies.

Carlos Ramos, LAVCA

Mexico inches closer to Brazil in venture capital volume in 2024

Venture capital funding to startups in selected LatAm countries, 2022 to Q3 2024 (\$M) Source: LAVCA

COUNTRY	% OF LATAMVC,Q3 2024	Q3 YOYCHANGE
BRAZIL	33%	-58%
MEXICO	44%	23%
COLOMBIA	15%	162%
CHILE	4%	138%
ARGENTINA	3%	1,060%
PERU	0%	-100%
TOTAL	100%	-21%

Talking to Mexican founders, we see how tech has expanded to more widespread adoption year after year as digitalization grows.

Software companies found a more compelling value proposition such as automation for SMEs, and increased metrics such as retention and LTV. Going beyond venture capital, debt has also been important to the growth of Mexican startups, as seen in rounds raised by fintechs Digitt and Stori and the marketplace Justo.

One challenge that remains for the Mexican market is building stronger local liquidity solutions, including public markets. These would allow some capital to flow back into the regional players of the ecosystem.

Carlos Ramos, LAVCA

Latitud Founder & Investor Survey 2024: hope for the end of the fundraising winter by 2025

Do you feel like the fundraising environment has gotten better or worse in 2024, in comparison to 2023?

Do you feel like the fundraising environment will get better or worse in 2025, in comparison to 2024?

Latitud Founder & Investor Survey 2024: LatAm market maturity is still in the middle of the road, with similar factors for optimism and pessimism

General Market Maturity Index

2.465/ 5

(With 0 being incipient and 5 being mature, how would you rate the current maturity state of the segment you're in as a startup founder, investor, or operator, when comparing it to other mature markets in your segment?)

Current quality of product development Current quality of competitors Market education and adoption Funding opportunities presence of success cases

Current quality of product development Current quality of competitors Market education and adoption Funding opportunities presence of success cases OPPORTUNITIES YET TO EXPLORE REGULATIONS AND TAXES

Latitud Founder & Investor Survey 2024: AI usage is widespread in early-stage LatAm, with little turning back

Yes, I've been using artificial intelligence in my startup and intend to keep using it

I haven't been using AI in my startup but intend to use it in the future

Yes, I've been using AI in my startup but I don't intend to keep using it

I haven't been using AI in my startup and don't intend to use it in the future

Latitud Founder & Investor Survey 2024: LatAm early-stage challenges concentrate on fundraising, market adoption, and PMF

What are the most pressing general startup challenges you've been facing? Founders' answers only, multiple answers permitted

THE LATAM TECH REPORT

The Future of Fintech

executiv summary

E%en if Latin America and the Caribbean are now home to 3,000+ fintechs (with Brazil being the only market showing signs of consolidation in number of players), work is far from done. The segment expects a 27% CAGR between 2022 and 2028, leading to an increased re%enue share of LatAm in global fintech (along with more emerging markets).

Global fintech net revenue share by region, %

north america Europe Asia-pacific latin america Africa middle east

McKinsey's The Future of Fintech Growth (Oct 2023).

executive summary

Fintech concentrates the majority of venture capital in the region, not to mention 20+ unicorns. As the banking segment consolidates, B?C Lending, Payments, and Fintec Software rise as the segments that received the most venture capital throughout this year

From banking to payments and remittances, from behaviors to regulations: the main trend we see is an asymmetrical development of finance across Latin America. But there are also regional commonalities in taking fintech to non-fintech companies through embedded finance, building multi-product solutions, using WatsApp as a wedge, and increasingly adopting artificial intelligence

Looking at the medium to long-term, fintechs are entering realms such as B?B Finance, SaaS, and Generative AI

Yet challenges remain for fintechs in the region, such as cost of capital, updates on data protection and privacy regulations, cybersecurity treats, and the asymmetrical development of Open Finance.

Latin America is home to 20+ fintech unicorns

LatAm fintechs go from banking to backoffice

Banking

#

NOMAD

Ubank STARKBANK stori uala

personal finance & wealth management

lending

Addi ALTISirBamboo &bankuish

C creditas 4digitt dinie finanex finkargo Kontempe Paisa MASQUE UN ENViO

Xuixtra

wIBOND xepelin

insurance

(latu) Seguros

payments & remittances

corporate financial backoffice

belvo.@BHub

Conta Azul Dock NA

Fintech represents 57% of LatAm venture capital startup investment in 2024

That share stayed close to 40% in the previous 5 years. As the banking segment consolidates, B2C Lending, Payments, and Fintech Software rise as segments that already presented more funding in 2024 YTD compared to the full year of 2023.

VC Investment in Latin American Fintech by total and selected sectors, 2019 to Q3 2024 (\$M) Source: LAVCA

In LatAm, fintechs are increasingly looking to the unbanked and underbanked

In search of new market segments to conquer and lead, fintechs are looking at the remaining unbanked and underbanked citizens and businesses. Fintechs with this customer segment recently became a majority in LatAm, according to the IDB.

In the B2C segment, the lending segment leads in serving the unbanked and underbanked. In B2B (specifically small and medium businesses), payments and remittances take the lead instead.

Both are consequences of the progressive access to more basic financial services, such as accounts.

Fintechs catering to unbanked and underbanked retake growth in LatAm

IDB's Study: Fintech Ecosystem in Latin America and the Caribbean Exceeds 3,000 Startups (Jun 2024)

The US sees a chartered bank for every 70,000 people. Brazil is the best scenario in LatAm for that, and still sees one bank for every 1M+ people.

Current institutions just don't have the capacity cover so many customers, yet the need for credit isn't going anywhere. That's when innovation and competition need to come in through fintechs.

The challenge for them, of course, is finding gaps and doing lending well, being good at these four components and exceptional in at least one: go-tomarket, underwriting, collections, and cost of capital.

In Mexico, only 10.5% of the Mexican adult population has a credit card – and this is worse if we talk about vulnerable populations.

The pace of adoption will depend largely on the ability of fintechs to innovate, diversify their offerings, and build trust in sectors of the population that have historically been marginalized from the traditional financial system.

By targeting specific segments of the population, we can build tailored solutions that solve particular needs.

Embedded finance turns non-fintechs into fintechs

Seeing unbanked or underbanked populations inside their customer pools, non-fintech companies might also consider catering to that additional need due to the rise of embedded finance.

Businesses that go from retail and supply chain to software and telcos conquer an additional revenue stream from payments and remittances, credit cards, lending, investments, insurance, and more while outsourcing the time and cost involved in licenses, processes, and security measures integral to financial services.

Embedded finance players must put work into showing non-fintech customers 1. how the fintech product can interact with their current offerings and 2. how much added complexity they'll have in accounting and liquidity. There's a business learning curve not seen when catering to other fintechs.

We don't think every company will become a fintech company. But most category and industry leaders will embed financial services into their core business.

In Latin America, these cases can be even more successful than in other parts of the world because leading players tend to have dominant positions, and so are better positioned to execute the embedded finance play.

GASTÓN IRIGOYEN, POMELO

Mercado Libre took off an incredible new business when it added banking and credit services to its marketplace. There's space for other retailers and industries such as automotive and gig economy to verticalize by adding a fintech layer (not to even mention SaaS, which is a given).

Taking lending as an example, markets such as Brazil and Mexico present an interesting opportunity: Brazil due to its highest spread, and Mexico with an opportunity to be filled due to its bancarization lag.

PEDRO DE PAULA, ALTIS

A large portion of the population who has restricted access to financial services can still access consumer apps – which means these apps can become an entrance door to offerings such as their first credit.

As users keep interacting with the app, they not only conquer a better credit score but also generate data and retention rates that improve even the core offering of the consumer app.

Instant payments see an asymmetrical development across LatAm; the present is multi-rail

In less than four years, 20%+ of payments worldwide will be real-time. Yet the regional data doesn't paint the full picture. Looking at real-time, account-to-account payments adoption more granularly by analyzing adoption per service inside LatAm SMEs (99.5% of businesses in the region), we see that payment methods see an asymmetrical development across LatAm.

Acceptance of digital payments in LatAm SMEs

Mastercard's The state of financial inclusion post COVID-19 in Latin America and the Caribbean (May 2023)

SOURCES

Instant payments see an asymmetrical development across LatAm; the present is multi-rail

Brazil's PIX acceptance is at 95%. In the private, lessstandardized sector, Peru's YAPE acceptance is at 85%, Colombia's Nequi is at 83%, Argentina's Mercado Pago is at 75%, and Mexico's SPEI acceptance is at 51%, while CoDi (Cobro Digital) remains at 5%.

There's still a lot to be achieved in terms of customer education, trust, integrations with current softwares, features expansion, regulations, and finally frequent usage for instant payments to be widespread across LatAm. On the flip side, one digital payment might actually lift the others, as the region has so much to yet be digitalized.

	Argentina	MODO ? BECETAT	MODO TRANSFERENCIAS3.0	28% 20%	Acceptance of digital
	Brazil	mercado pago	MERCADOPAGO	75%
	Brazil	opix	PIX	95%	payments in
	Colombia	PicPay	PICPAY	45%	LatAm SMEs
	Colombia	NEQUI	NEQUI	83%
		DAVPLATA	DAVIPLATA	55%
			PSE	49%
		transfiya	TRANSFIYA	25%
	ElSalvador	opto	OPTO	4%
Q	Guatemala	B	YOLOBANTRAB	16%
Q	Guatemala	fri	SOYFRI	11%
	Mexico	SPE CoDi	SPEI	51%
			CODI	5%
			PAGATODO	5%
		dapp	DAPP/PIM	1%	Mastercard's The state of
	Peru		YAPE	83%	financial inclusion post COVID-19 in Latin America
		pln	PLIN	51%	and the Caribbean (May
		tunki	TUNKI	19%	2023)
		8目	BIM	12%

SOURCES

Brazil with very advanced regulations and banking systems, evolving at a good pace. Argentina with its complexities on capital controls. Mexico with its insistent high penetration of cash. Central American countries with their lack of individual scale and country-specific solutions. Each country is fighting its own challenges, with its own strengths and weaknesses.

I'm a bit skeptical when people think we’ll live in a region of standardized solutions. Fintech is global and we see trends being applied and copied from one place to another, but the real secret sauce is how to adapt a global success trend to your particular market. The best path is to deploy region-wide solutions that accept and cope with the intrinsic complexity, volatility, and fragmentation of Latin America.

For small merchants, the importance of instant payments goes beyond just convenience. It's tied to having resources quickly available, minimizing the impact of inflation and accelerating available cash flow, purchases, sales, and prosperity.

LUIS SILVA, CLOUDWALK

Instant payments and WhatsApp: two wedges for LatAm fintechs

Quickly seeing the benefits of instant payments makes them the perfect catalyst for a cash-to-digital transition in LatAm (and for fintechs to offer additional services to both end consumers and businesses). But there's another wedge LatAm startups, fintechs included, are also using: the omnipresent WhatsApp.

A digital bank for Generation Z, NG.CASH launched a feature called NG.ZAP. Through WhatsApp, customers can access banking services such as making instant transfers and solving financial queries.

There are still a lot of cash payments across Latin America. One strategy to incentivize digitalization is offering instant payments within WhatsApp.

We've seen that this is a really interesting substitute for cash – it's recognized as an easy next step by both consumers and small businesses, and for the latter, an entrance door to the benefits of digitalization, such as improved reconciliation.

Both WhatsApp and Pix provoked a change of behavior in Brazilian consumers and businesses, pushing them to use digital communications and digital payments.

Yet both are networks that are almost free to use. So we don't see either of them as revenue channels but rather as distribution channels. WhatsApp and Pix are ways for us to later introduce our conversational AI and added services, and monetize on top of these instead.

luiz ramalho, magie

LatAm fintechs are raising stickiness by becoming multi-product

As users became thousands and then millions, banks and neobanks turned into multi-product platforms as a way to raise average revenue per active customer – Nubank being one prime example.

Other fintechs are now following suit and creating an end-to-end financial services ecosystem, building or using infrastructure fintech offerings such as digital savings, both soft and hard collateral lending, investments, and insurance.

SOURCES

Multi-product: rise in engagement and cross-sell positively impacted Nubank's ARPAC in Q2 2024

MonthlyARPACbyQuarterlyCohort （USS|FX Neutral)

We went through phases of fintech in LatAm. First we had B2C, then B2B focused on SMBs, and now we see B2B2C focused on enterprises, inside and outside finance.

Within the financial institutions we support, we see they want more stickiness, retention, and an additional revenue stream, yet without incurring additional development costs, especially as they expand to more countries.

Being multi-product was a challenge a decade ago as you needed to develop everything from scratch – even Nubank kicked off with a credit card product only.

We're now in a different age for fintech: you can launch a new product in less than a week, with a couple of lines of code, and low upkeep costs due to APIs. Your team can focus on core offerings while your startup quickly adds compliments that'll lead to improved retention and revenue, maybe even geographical expansion.

In this scenario of increased competition between product bundles for the users' attention, communication and distribution strategies are even more expensive – and therefore more valued.

mário augusto sá, ng. cash

Each fintech needs to figure out the best time to diversify, based on some conditions:

How commoditized their current offering is,
The cost of developing the back-end infrastructure that’ll support each additional feature or geography (as financial services are highly regulated across each country),
And the reduced margins when adopting a thirdparty provider and costs in the front-office.

Bruno Magrani, Investor and former Public Policy @ Nubank, Meta

2025 will mark the shift to digital remittances predominance in LatAm

Remittances are poised to become predominantly digitalized in LatAm by 2025, catching up to the global trend (where digital remittances became the prime choice by 2023).

Yet cash is still very relevant, and over a third of families globally state limited options to access the money they receive. The main obstacle for more transactions is high cost (including hidden fees), while providers deal with various regulations and maintaining security and speed.

As we've seen in other segments, challenges can become opportunities in the hands of fintechs. In LatAm, \$85B worth of cash-based remittances could be converted to digital. LatAm remittance fintechs are betting on applications such as bill payments and transfer via stablecoins.

Digital remittances to surpass cash-based remittances by 2025

Doing remittance infrastructure as a service, we have to consider the challenge of asymmetrical banking penetration in Latin America. In countries such as Mexico, Colombia, Guatemala, and Honduras, if you only focus on the banked receivers of remittances, you'll never achieve market leadership.

While we also foster digital remittances as they're more efficient, we have to consider the current reality of remittances. We have to let family help be collected in multiple ways, not conditioning financial inclusion to banking.

Fintechs apply AI to both front and back offices

Data-centered financial services have been using artificial intelligence for over a decade, employing machine learning to derive patterns out of large sets of structured information and support services such as credit scoring, underwriting, and fraud prevention.

More recently due to lowered cost, and much like other sectors, fintechs have been going beyond the risk segment and building or incorporating AI-powered applications for more parts of the back office (e.g. coding productivity) and finally arriving at the front office (e.g. customer support), using both "traditional" and generative AI.

Working in the infrastructure layer, M hyperplane Hyperplane built proprietary foundational models for financial institutions to improve decision-making in risk, collections, and marketing based on firstparty data. (Exit to Nubank)

Magie's conversational AI understands audio, texts, and images to execute financial services such as transfers and bill payments inside WhatsApp.

Fintechs that don't understand the impact of AI will inevitably lose the capacity to be efficient, innovative, and transformative for their customers' lives, shaping trends rather than following them.

Automating repetitive tasks, optimizing transfer security, offering personalized product recommendations and credit offerings: artificial intelligence allows us to operate with precision at a scale that couldn't be reached in any other way.

By the end of 2024, 90% of customer support interactions at InfinitePay were handled by AI-powered tools, up from 75% the previous year. These interactions are resolved in seconds, with customer satisfaction ratings comparable to those of our top human analysts. The efficiency gain in customer service is estimated to bring annual savings of US\$20M.

LUIS SILVA, CLOUDWALK

Fintechs are coming for B2B

While embedded finance might already be a trend, B2B companies have yet to receive the intuitive fintech tools seen in B2C applications, even as this is a sizable market. Taking payments, a common initial wedge, as an example: B2B payments in rising markets are growing at a faster pace than in developed markets (14% vs 11% CAGR). By 2027, LatAm, Africa, and APAC will account for 40% of B2B payments.

But even if B2B payments flow digitally, they're also stuck in time. It's a back-and-forth process ridden with approval challenges, manual documentation, low visibility, and high fees. It can take up to 14 days and six intermediaries to process a B2B invoice, compared to 1-2 days for B2C.

In the search for more efficiency, B2B companies can contact a payment fintech directly or use their services as they subscribe to a SaaS or join a marketplace (models that can develop a fintech layer themselves or add one via embedded finance).

Rising markets to reach 40% of B2B Digital Payments

(Digital B2B Payments Volume, \$B)

B2C companies see a more rapid digitalization since customers dictate that change. When you talk about B2B, there's a true digitalization lag caused by a lack of system integrations and updates, and both issuer and payer have to walk in the same direction.

It's because of this added complexity that you look at Brazilian payments and still see, even as Pix's adoption is massive, a lot of transfers and boletos [bank slips] between companies.

rafael stark, stark bank

As we fill the software gap for B2B companies in Latin America, including digital payments in that same offering becomes a natural next step.

With that, B2B Payments will move away from one-size-fits-all to verticalized solutions. Different industries have different profiles, due dates, and risks, which makes it difficult to adopt a generic solution. Payments will be a component of each complex, verticalized workflow.

SaaS enters fintech, and fintech enters SaaS

In The Trends, we saw how fintechs are entering other fintechs through infrastructure plays. Fintechs are also embedding their services inside SaaS, as a way for them to further improve and monetize their user experience.

But we can also see it the other way around, with fintechs tackling financial pains first but then adding a SaaS layer.

SOURCES

There are various playbooks for various industries. But in marketplaces, we saw a challenge in burning cash to build both supply and demand. In SaaS, we saw a challenge in actually selling paid software in LatAm.

So we decided to start with fintech and then add the rest. Our hypothesis was that in the region, you have to address pains from the bottom up, going up the pyramid of Maslow's hierarchy of needs. As customers came back and back, we built the rest of our offering.

SANTIAGO MOLINA, FINKARGO

About players that going the other way around, from lending to software: this comes from a perception of what gives them an edge in relation to traditional banks.

It could be better origination, better evaluation, or better cost of funding. As larger players generally have better cost of funding due to scale, most lending players look at the first two advantages.

Joining fintech and software is a way for them to both attract more customers (improving expansion) and capture more data (improving their lending offer).

gustavo mapeli, kanastra

GenAI will unlock billions of value in the financial industry

As the access cost decreases and technology evolves, it's expected that financial players will ramp up their AI adoption.

While traditional AI should keep its dominance in risk and legal analysis, GenAI can be employed as a complement and see a larger role in areas such as retail (more sophisticated customer support), financial/wealth management (portfolio suggestion), and back-office (documentation and report generation).

Across the banking industry, Generative AI is expected to deliver \$200B+ in global value creation. In LatAm, Open Finance's development will allow fintechs to effectively gather data, with their foundational models going from theory to practice.

Value created by AI at stake by segment and function (\$B)

Cost of capital

Even with recent cuts by the Federal Reserve, the impact on LatAm's interest rates should take a while, and even longer to be reflected from public to private markets. High rates have a direct impact on the cost of capital for both companies and end consumers. Fintechs already usually have higher borrowing costs than incumbents, and this added context leads to even more expensive access to credit and venture capital (in the latter, also higher selection as the fintech market becomes more populated). Fintechs can also see an impact on the demand for solutions such as lending, coupled with high inflation and delinquency rates. All of this pushes fintecsh to lay more into their lean structure to keep margins high.

Updates on data protection and privacy regulation

Chile (1999), Argentina (2000), Uruguay (2008), Mexico (2010), Peru (2011), Colombia (2018), Brazil (2018), and Panama (2019) all have data protection and privacy regulation, mostly inspired by European standards. But multiple LatAm countries have manifested the desire to update their frameworks, and all digital businesses must be ready to adapt alongside them – including fintechs, especially those highly reliant on customer data collection to power their offerings.

Cybersecurity threats

Latin America was the region with the largest increase in cyber attacks (+53%) in Q2 2024, compared YoY. In response, after China, Latin America is the region where cybersecurity investments are growing the fastest. According to the IDB, 57.22% of fintechs in Latin America and the Caribbean have a policy and/or system in place against cyber threats, while 21.26% are in the process of implementing them.

fintech: the challenges

The asymmetrical development of Open Finance Open Finance allows for an ecosystem of financial services, in which consumers allow their data to be shared between financial institutions for more customized financial services and products.

For fintechs, Open Finance can be an entrance point to 1) sell financial solutions inside traditional banks and 2) use their customer history to provide better solutions in areas such as transfer authorizations, credit access, and investment/financial management (also including previously underbanked and unbanked consumers).

Yet much like the payments scene, Open Finance's pace of development varies across LatAm countries, and applications remain limited.

Open Finance has a different meaning across the region, with varied levels of implementation and consumer adoption

Open Finance maturity varies significantly, with asymmetrical development in regulatory frameworks, market dynamics, and consumer adoption.

Yet the scenario is promising. In the next three years, we expect the integration between Open Finance and AI, improving predictive models and personalized offerings, and the massification of "pay by bank" or account-to-account payments, integrated into everyday apps and wallets.

pablo viguera, belvo

There’s still no product that is an obvious winner in Open Finance. That means there’s a lot of opportunity to prioritize this movement in the product development roadmap, with the end goal of making customers perceive true value. Open Finance will probably lead to great innovations — just not on the timeline we initially expected.

Open Finance is just one example of a larger trend in LatAm: fintechs cooperating with governments to develop frameworks and licenses that'll give them the approval and the customers and investors' confidence to operate in profitable segments, inside the highly-regulated sector that is financial services.

Bruno Magrani, Investor and former Public Policy @ Nubank, Meta

I’ve been in fintech for a while and have seen many challenges. But in 2024, I see opportunities.

Most governments have understood that an efficient fintech environment is hugely beneficial for the countries, so regulations are getting clearer and competition is incentivized. Even for effortconsuming challenges such as cybersecurity and privacy, processes are more widely known and tools available at large. Talent has also improved, with many more people with experience in the industry.

Of course, how to mix all these variables into a scalable business will always be a main challenge – but I’d say we live in great times for fintech.

JOÃO DEL VALLE, EBANX

THE LATAM TECH REPORT

The Future of SaaS

executiv summary

LatAm is the fastest-growing region in the world in terms of cloud market revenue up to 2026 – and /aa/ represents \~40% of the industry, according to IDC's global benchmar5s4

REGION	CAGR
LatAm	28%
North America	18.4%
Rest of world	21%
Europe	22.6%
Africa	25.1%

Venture capital investment in LatAm SaaS is picking up the growth pace seen before the Covid-19 pandemic, and regional solutions range from e-commerce to cybersecurity.

executive summary

Yet LatAm SaaS :s st:ll a growing market, lack:ng saturat:on and consol:dat:on. W:th various industries lacking digitalization, Hor:zontal and Vert:cal SaaS are :n a race to become category or :ndustry leaders. There are var:ous paths to :t, from expanding products and geograpies to leveraging artificial intelligence

Look:ng at the med:um to long term, most developments w:ll be seen :n the Vert:cal SaaS movement. VSaaS w:ll go beyond payments and add new multi-product layers. Theres also the r:se of Vertical AI, wh:ch can both k:ll and breathe l:fe :nto global and reg:onal VSaaS

Bes:des the low adopt:on of software :n LatAm, SaaS :n the reg:on also face challenges such as adapting to new regulations and protect:ng aga:nst :ncreas:ngly soph:st:cated cybersecurity treats.

LatAm unicorns in e-commerce, fintech, and wellness adopt SaaS

LatAm SaaS startups go from e-commerce to cybersecurity

e-commerce

olist V VTEX

business
process
management

linkana Murai pipefy

mkt & sales

&assis birdie

NUVIA yalo

RD STATION(Exit to TOTVS)

Health

alinea saludtools Legal

cometa

vertical saas

Legalbank

Lexter

Education

BETTERFLY

human resources management

Gupy

financial management

BHub CLARA

Conta Azul Contabilizei.

cybersecurity

CBAYONET idwall

Unico

Pharma

Restaurants

Retail * pulpos

LatAm SaaS in Fintech, IT, and Security attract more venture capital in 2024 YTD compared to the full 2023

VC Investment in Latin American Enterprise Software by Tech Vertical, 2019 to Q3 2024 Source: LAVCA

LatAm SaaS is a growing market with space for entrants

Ma"ket+met"ics+p"ovide+a+glimpse+into+the+state+of+ the+softa"e+as+a+se"vice+ma"ket+in+LatAm

! Top-decile+softa"e+as+a+se"vice+in+the+"egion+ "epo"ts+CAC+Payback+Pe"iods+that+a"e+32%+ loe"+than+US+benchma"ks;*

Ac"oss+all+stages,+LTV/CAC+is+at+least+2x+ highe"+hen+compa"ing+LatAm+and+US+SaaS;

CAC Payback by company ARR size

LTV/CAC by company ARR size

LatAm SaaS is a growing market with plenty of space for new entrants

" While churn ra#es don'# vary significan#ly be#ween #he #op decile and median in #he US, i#'s common for La#Am #op-decile performers #o have almos# half #he churn ra#e of #he median.

These me#rics sugges# #ha# La#Am's SaaS marke# is less sa#ura#ed in comparison #o more ma#ure marke#s, wi#h fewer compe#i#ors for cus#omer acquisi#ion and less incen#ive for cus#omers #o churn and #rade players.

Monthly churn by company ARR size

The US is facing SaaS fatigue. In 2023, organizations used an average of 371 SaaS applications. They get bombarded by new businesses pushing new products every day, in addition to large incumbent platforms up- and cross-selling products. This leads to pricing pressure and longer sales cycles.

The penetration of SaaS is still significantly lower in LatAm, and the trend of digitizing business workflows is unstoppable. It is a question of how quickly adoption will occur, not if.

Latin American markets are lagging behind 10 to 15 years in comparison with the developed world in terms of SaaS penetration.

Having said that, I believe that the LatAm SaaS market will leapfrog the expansion years that we saw in the US and Europe. The years spent on the traditional SaaS business model of paying per license are gone; we're starting to feel the pressure of competition that's already a cautious reality in developed markets.

Vertical SaaS rises with the digitalization of sizable niches in LatAm

LatAm is full of markets that are sizable, yet under digitized and spread across several companies, generally SMBs (see Brazil as a proxy). This presents an opportunity for LatAm SaaS – but they have to develop strategies to convert these business owners to the digital world, e.g. in sales and pricing.

SOURCES
Latitud Founder & Investor Survey 2024; Atlantico's Latin America Digital Transformation Report 2023; State of SaaS LatAm Report (Feb 2024).
The new breed of LatAm SaaS startups focuses primarily on SMBs

There's an opportunity for Latin America to leapfrog in software adoption. That's conditioned to SaaS players overcoming skepticism by demonstrating value without upfront friction.

We adopt a ramp-up approach, combining no/ lower monthly fees with indirect monetization streams derived from customer relationships (transactional revenue, financing and intelligence solutions, etc). We think that approach makes a lot of sense for LatAm.

There's still a blue ocean in LatAm SaaS, if players can learn and adopt specific conversion strategies for the region.

We adopted Ahrefs' model of \$7 for a 7-days trial, when customers can see value in the form of growth and be convinced to pay monthly. If customers are not even willing to invest a few dollars into their business, it might not be worth it to take them as a freemium user.

Second, we do group demos by industry. This is to protect our sales team cost, as 1:1 no-show is higher than average in the region. Third, we have a sales academy to educate customers in digital marketing and sales.

Latin American markets are lagging behind 10 to 15 years in comparison with the developed world in terms of SaaS penetration.

courtney mccolgan, runa

saas: the trends

Vertical SaaS rises with the digitalization of sizable niches in LatAm

Businesses just beginning their digital transformation journey across various sizable industries open an opportunity not only for Horizontal SaaS (robust software that speeds up growth by catering to a wide range of industries) but also for Vertical SaaS (software that trades market size for market share and leadership, offering targeted value by solving specific industry pains).

Yet the decision between Horizontal or Vertical SaaS is not set in stone. Even horizontal players have some specialization in the form of serving multiple industries but restricting by company size or similar business processes. It's also not uncommon to see horizontal players assessing the highest-potential industries after their initial growth spurt, and then unbundling themselves into verticalized solutions.

Vertical SaaS rises with the digitalization of sizable niches in LatAm

Cometa is a management software focused on parents and schools. It allows parents to pay their monthly fees through the cometa" platform, while the staff doesn't have to manually do invoicing, collections, and reconciliations.

Fudo (Deli in Brazil) is a point-of-sale software for restaurants. Some of its features include digital menus, order status confirmations for consumers through WhatsApp, cash flow and margin calculations, and storage management.

Legalbank Focused on legal firms, LegalBank automates management and financial routines from contract creation to payment processing, leading to a revenue increase of up to 25%.

* pulpos Focused on mom-and-pop shops ("tiendas") across Mexico, PulpOS offers features in storage management, sales (orderregistration, discounts, cash flow management), finances (invoice emissions), and digitalization (e-commerce creation).

Extendeal is a B2B procurement service focused on retail pharmacies. Through its Vertical SaaS and marketplace, pharmacies can find suppliers, manage orders, and refill their shelves efficiently.

Also focused on retail pharmacies but on the customer support side, Maggu supports clerks in looking at a customer's history and providing better product recommendations, complimentary offers, and usage guidelines.

Small and medium-sized businesses across the region are increasingly looking for scalable, cost-effective solutions to compete in a rapidly digitalizing economy. Yet there are still lower levels of digital adoption in LatAm compared to more developed markets.

There's a substantial opportunity to fill this gap with SaaS, providing tools that simplify business processes, drive efficiency, and enable growth. As SMBs continue to embrace digital transformation, the demand for tailored software solutions is likely to expand.

LatAm SaaS is raising stickiness by becoming multi-product

Salesforce, Slack, and Trello are some examples of cloud companies who unbundled and focused on doing one thing really well to win against legacy players.

But fearing software management and subscription fatigue as competition increases, plus seeing the rise of artificial intelligence and no/low-code applications, SaaS are going back to becoming aggregators and hyperbundling to lead their industries.

Win the category, 2. Expand offerings, and 3. Extend through the value chain: as software as a service matures in LatAm, startups begin applying this growth playbook.

LatAm SaaS is maturing in terms of adoption, teams, and venture capital. Those who already nailed down their control point (i.e. the most important system for their customers) can do additional problems discovery, follow the spending trail at companies' P&L level, and create layers of additional products.

The SaaS Expansion Roadmap

Win the category:

Occupy the control point (CRITICAL SYSTEM) and scale locations

EXPAND OFFERINGS:

厄 GO MULTI PRODUCT AND INTEGRATE TO GROW ARPA

回 EXTEND THROUGH THE VALUE CHAIN:

MORE OFFERINGS TO KEY STAKEHOLDERS

LatAm SaaS is raising stickiness by becoming multi-product

Being multi-product can increase metrics such as average revenue per account (ARPA), net revenue retention (NRR), and lifetime value (LTV).

Both horizontal and vertical SaaS are becoming multi-product – but this is especially important for VSaaS in smaller markets, as an essential step to capture a larger share.

One of the most common expansion routes for vertical software as a service is adding a financial services layer, especially payment processing.

Multiple payment facilitation services are now easily available through APIs. VSaaS can either leverage these services through B2B embedded finance providers or develop vertical-specific payment processors.

Performance metrics of single and multi-product SaaS in multiple regions

SINGLE-PRODUCT COMPANIESMULTI-PRODUCT COMPANIES

A crucial aspect of being multi-product is adding products in a logically adjacent space to your core product. New products should be built using specific insights and data you leverage from your core product.

Both horizontal and vertical SaaS businesses can become multi-product. However, VSaaS businesses tend to have a stronger and slightly more loyal customer base, which makes product expansion easier.

In SaaS, and especially in VSaaS, it’s crucial not to fall into the "small TAM trap" by underwriting an early-stage deal based solely on the startup’s initial product.

Investors should see it as an ever-expanding addressable market, as the startup builds on its core suite with incremental offerings (up-selling, cross-selling, and adding embedded financial services).

For SaaS founders, this approach to expansion lays the foundation for better liquidity and higher valuations at exit.

WILLIAM CORDEIRO, SAASHOLIC

Case: LatAm Vertical SaaS is adding a payments layer through embedded finance

One of the most common expansion routes for vertical software as a service is adding a financial services layer, especially payment processing.

Payments have gone from value add to commodity – yet companies need to "own the right" to do it for their customers, and that's what VSaaS are aiming to conquer.

% of SaaS in multiple regions with select fintech offerings

Financial services aren't the main offering of a software as a service – yet they're extremely important to customers. The combination of fintech and SaaS makes the overall product disproportionately more valuable.

To validate product-market fit in the fintech vertical, many SaaS companies begin with thirdparty solutions. This approach allows them to assess which parts might later benefit from inhouse development if they require greater control and flexibility.

ADEMAR PROENÇA, LEGALBANK

Founders are often strategically focused on building volume within their verticals before adding fintech offerings. But while these shifts occurred in sequence in other regions, they are unfolding simultaneously in LatAm.

The convergence of verticalization and embedded finance is especially relevant to Latin America. Incorporating fintech capabilities is quickly becoming essential for vertical players who want to stay relevant and fully meet client needs.

camila vieira, qed

The global cloud industry is surfing the artificial intelligence interest boom…

The market cap of The Cloud 100 jumped 25% YoY and reached \$820B – the highest list value in history. Two factors drove that rise: first, companies have emerged from market turbulence more resilient than ever, and regained valuation with that. Second, there's the rise of artificial intelligence.

AI companies drove a massive jump in market cap, of \$100B+. AI is now the highest-valued category of The Cloud 100, at \$176B (21% of the list value), followed closely by Fintech, at \$173B.

AI increases the breadth and depth of the value a SaaS company can deliver: as many software businesses are all about creating efficiency, AIpowered agents are uniquely suited to automate tasks and provide datadriven insights inside workflows.

RANK^	COMPANY	WHAT IT DOES	VALUATION	FUNDING
1	OpenAl	Al researchand products	$86B	$11.3B
2	Databricks	DataandAlplatform$43B		$4B
3	stripe	Financial Infrastructure	$65B	$2.2 B
4	Canva	Visual communication platform	$26B	$560M
5	Anthropic	Al research and produets	$18.1B	$8.9B
6	ServiceTitan	Tradeindustry software	$7.4B	$1.5B
7	Scale Al	Data infrastructure	e$13.8B	$1.6B
8	Deel	Global HR	$12B	$675M
9	Wiz	Cloud security	$12B	$1.9 B
10	Navan	Travel and expense management	$9.2B	$1.6B
11	Miro	Digitalcollaboration$17.5B		$475M

The Cloud 100 2024: Top 10 Companies

… and LatAm SaaS is also setting the stage to surf that AI wave

"It’s rare to find a cloud company these days that isn’t, at some, level an AI company." While this quote from Bessemer's State of the Cloud 2024 isn't yet a reality in LatAm, demand is pushing SaaS to adapt and embed AI – especially after the widespread adoption of GenAI models such as Claude, Chat GPT, and LLaMA.

Global data shows that AI software utilization is higher than the overall software average (72% vs 65%). The proposition is so strong that might push players in traditional segments like health and law to leapfrog, and go from no-software to AI + SaaS software.

The result is that in LatAm, 70%+ of SaaS either already launched or plan to launch an AI feature, either consumer-facing or running in the background. This was not the case 2 years ago.

LatAm SaaS: did your company launch any AI features products?

State of SaaS LatAm Report (Feb 2024)

SOURCES
Bessemer's State of the Cloud 2024; Vertice's SaaS & Cloud Spend Unwrapped Q2'24; Tidemark's AI: Extinction or Evolution? (2023); State of SaaS LatAm Report (Feb 2024); Alexander Busse in interview for Latitud.

LatAm SaaS will go beyond payments and add new layers

Some SaaS in the region are already starting to go beyond payments and add other layers to their product expansion roadmap – and this is poised to really pick up in the medium term, as the market matures.

The cash flow data collected through payments can set a good foundation to expand inside the fintech category. This data can help underwrite the most adequate lending products for each industry (e.g. credit cards, anticipation of receivables, short and long-term loans). SaaS can also consider payroll services (e.g. calculation, processing, taxation, and reporting).

LatAm SaaS layers aren't restricted to the SaaS → Payments → Lending route though. Based on the most pressing industry pains, startups have bet on other expansion routes, such as Marketplace and Ads as well.

The B2B procurement service focused on bringing more purchasing intelligence to retail pharmacies. Using SaaS as its initial wedge into the market, Extendeal then added a marketplace layer, allowing pharmacies to discover even more suppliers.

凹maggu

Maggu supports retail pharmacy clerks to provide better product recommendations, complementary offers, and usage guidelines. The startup also offers Maggu Ads, leveraging the company's direct connection with customers to collect data. The pharmaceutical industry can see which products are in demand and run effective marketing campaigns.

SOURCES Fractal's State of Vertical SaaS (Dec 2023).

SaaS, fintech, marketplace, and any other layers: what's important to be a winner-takes-all is to start by solving your customers' main pain and conquer their engagement with that. That's even more than pinpointing your revenue model.

At B2B Pharma, we identified that the biggest problem and potential addition of value was allowing them to make more intelligent purchases. After finding product-market fit, offering them more suppliers through a marketplace or financing working capital were natural steps.

GUIDO STEFANI, EXTENDEAL

AI can both kill and breathe life into SaaS

Old and new, SaaS players are seeing increased competition from AI-native applications, leveraging foundational models to offer similar value props. The long-term risk is full substitution – companies going from buying software for their employees to outsourcing functions to AI-native service providers, whose TAM would become the labor + services markets.

Competition can both kill or force the evolution of current software players.

The winners of these battles lie in conquering the first step for every software to grow: dominating the control point, and data and workflow dominance with it. These winners will be able to better fine-tune models and offer features within workflows companies are already using.

In some industries, control points are dominated by adaptable software. In others, not so much, especially when we talk about solutions for specific industries. So the race is very much on between VSaaS and AI-native companies to dominate vertical proprietary industry data, train models, and launch applications with agile go-to-market aiming to seize control points.

SAAS: the challenges

Low penetration of SaaS in LatAm

As mentioned throughout the study, there's still a regional challenge for LatAm SaaS in educating potential customers on software's potential to make businesses more efficient. In the enterprise market, long sales cycles can be too much for young SaaS. In the SMB market, there's work to be done in building a culture of paying for tools that'll generate cost reduction and/or revenue expansion in the long run.

Operational costs

LatAm cloud and software players in the region might also face difficulties when dealing with economical factors such as currency volatility and the prohibitive cost of hardware (if using/building a local cloud provider). These added costs make competing more difficult in the global market of SaaS.

Updates on data protection and privacy regulation

Chile (1999), Argentina (2000), Uruguay (2008), Mexico (2010), Peru (2011), Colombia (2018), Brazil (2018), and Panama (2019) all have data protection and privacy regulations. Multiple LatAm countries have manifested the desire to update their frameworks, mostly inspired by European standards, and all digital businesses must be ready to adapt alongside them – including software as a service, highly reliant on customer data collection.

Cybersecurity threats

Latin America was the region with the largest increase in cyber attacks (+53%) in Q2 2024, compared YoY. Cyber threats are becoming more sophisticated due to the rise of artificial intelligence. While this poses a threat to all digital businesses, it also presents an opportunity for SaaS focused on curbing said cyber threats. After China, Latin America is the region where cybersecurity investments are growing the fastest.

The cost of importing hardware makes it very difficult to build a local cloud infrastructure that’s also sustainable. When operating inside Brazil only, remember opting for a global cloud solution while paying 50% more in taxes — because even then it presented a better cost than building a local cloud infrastructure for our software.

Be it AI or SaaS, local players have to understand they’ll compete with global prices even inside LatAm. And international players won't worry about a 50% importing tax within their infrastructure.

ANDRÉ FERRAZ, INCOGNIA

THE LATAM TECH REPORT

The Future of E-commerce and Logistics

executiv summary

Latin America shines in e-commerce and the segment will eep on growing at a 30% CAGR i: the :ext few years, driven especially by increased digital adoption in laggard regional marets. Together with e-commerce's development, logistics are receiving an extra push towards better infrastructure and efficiency, which will include more technology

Unicorns in e-commerce and logistics are spread out across the region's main marets. After venture capital booms to both sectors in 2021 and 2022, fu:di:g to these segme:ts prese:ted a slowdow: i: 2024 YTD.

Latin America is the fastest-growing region in e-commerce

	ASIA	US	EUROPE	LATAM	AFRICA
Retail e-commercevolume in 2023, $B	$1,811	$925	$631	$272	$36
CAGR 2023-2026	7%	14%	12%	30%	11%
Annual e-commerce spending per capita	$657	$3,370	$1,017	$467	$83

executiv summary

Latin America presents bot mature and developing ecommerce markets, with a similar asymmetry seen in digital payments. In logistics the rise of nearsoring is seen especially in Mexico but with a sizable opportunity in the rest of LatAm. Both e-commerce and logistics are also betting on cross-border commerce and the use of artificial intelligence for improved efficiency

Looking at the medium to long term some opportunities for ecommerce players are incorporating multi-rail payment systems adding a revenue stream through retail media and going B2B

Yet challenges remain for both e-commerce and logistics: canging taxes and regulations the need for security and infrastructure become even more important as these industries go cross-border (including nearshoring).

E-commerce unicorns are concentrated, while logistics unicorns are spread out across LatAm

LatAm e-commerce startups go from usual online merchants to back-office enablers

vertical saas

online merchants

aggregators

Merama

marketplaces

horizontal

vertical

mercanto morado.

Technology and fintech enablers

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trinio unbox vtex

LatAm logistics startups go from last-mile to cross-border

Last-mile delivery platforms, networks, and related services

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.ECONECTAMOS

dak:

mensajeros urbanos

XMottu Rappi

e-commerce fulfillment and enablement

99)minutos.com

clicoH

Loggi

melonn

MOOvA

vertical saas

Road, air, and ocean freight digital
marketplaces and solutions

COBLI

finanex finkargo* Ffrete.com

N nowports

nuvo cargo

ZARV

Venture capital for LatAm e-commerce is set to stay flat while logistics slows down in 2024

VC Investment in Latin America by Tech Vertical, 2019-1H 2024 Source: LAVCA

LatAm sees an asymmetrical development of e-commerce

E-commerce penetration among adults (digitalization) and in relation to GDP (economic maturity) varies across countries in Latin America:

SOURCES

PCMI's The 2023 Latin America E-commerce Blueprint (Aug 2023);
Renato Pereira in interview for Latitud.

LatAm sees an asymmetrical development of e-commerce

That has first a direct impact on growth rates. Brazil is LatAm's largest e-commerce market by a wide margin, yet presents the slowest growth trend. The countries with the fastest growth rates present varying degrees of digitalization and economic maturity (Peru, Mexico, Paraguay) – with Mexico presenting the best combination of market size and growth rate out of these.

This asymmetry leads e-commerce players to adopt different strategies. In underpenetrated markets, there's still an opportunity to migrate in-person retail volume to ecommerce and introduce digital payments. Markets with high e-commerce penetration have surpassed said challenges, and now require players to compete more deeply in user experience innovation.

E-commerce market volume, \$B Highest and lowest CAGRs

"Brazil and Mexico are the largest e-commerce markets, but size is not the only relevant metric when analyzing e-commerce opportunities in LatAm. Other countries like Chile, Colombia, and Argentina also hold an important transaction volume combined with more sophisticated players adding value to their ecosystems.

Buyers and sellers no longer go to the digital gondola only to try to sell an old used bike; e-commerce is turning into the go-to option for most of people's everyday needs. And that's not even the full story. To properly understand the potential, you also need to add to the picture a filter based on industries and on local complexities such as taxation, infrastructure, and logistics.

Looking at more developed markets, like the US, Europe or Asia, we still have room to double or triple our current penetration. And this should happen in the next 3 to 5 years. We are at the right place, at the right time. The e-commerce market is perfectly positioned to capture the tailwinds of e-commerce penetration's leading indicators, internet and credit/debit card penetration – for those who are willing to face the operational challenge of a fast-moving and scaling train.

Anibal de Frankenberg, Elevva

E-COMMERCE AND LOGISTICS: THE TRENDS

The asymmetrical development of instant payments is also seen in e-commerce

LatAm sports the highest global percentage of account-to-account payment penetration in e-commerce, at 20% (yet still behind credit cards, at 35%). Yet, as we mentioned when looking at The Future of Fintech, the regional data doesn't paint the full picture and payment methods see an asymmetrical development across LatAm, ecommerce included.

The presence of real-time and account-to-account payments is largely due to Brazil, where PIX is used by 144 million Brazilians (4 in every 5 adults) and transactions between customers and businesses via PIX have already doubled since 2022. While Colombia and Peru seem to be following in Brazil's footsteps in account-to-account payments adoption inside e-commerce, the reality is different in countries like Argentina and Mexico, where digital wallets are preferred. In every LatAm country, though, cards are still the preferred choice.

The asymmetrical development of instant payments is also seen in e-commerce

LatAm e-commerce payment methods

	DIGITALWALLETS	CREDITCARDS	DEBIT +PREPAIDCARDS	ACCOUNT TOACCOUNT（A2A)	BUY NOWPAY LATER	CASH ONDELIVERY	OTHERS
ARGENTINA	31%	35%	19%	10%	1%	3%	1%
BRAZIL	16%	40%	9%	30%	<1%	1%	4%
CHILE	20%	26%	32%	17%	<1%	2%	4%
COLOMBIA	18%	27%	18%	25%	1%	6%	5%
MEXICO	28%	33%	22%	6%	1%	2%	8%
PERU	11%	31%	21%	4%	<1%	6%	11%

The state of payment rails in e-commerce is defined by two key drivers. On one hand, consumers will search for the option that gives them more access to credit and lower usage friction. On the other hand, merchants will search for the option that best optimizes payment approval rates and presents lower fees. Payment methods will keep being created to leverage these drivers.

Renato Pereira, Sr. Director of Corporate Development @ Mercado Libre

Commerce fills historical gaps in logistics through infrastructure and tech

Logistics is filled with challenges, worldwide or LatAm. In the region, we see a sector with outdated technology and inefficiencies that lead to low margins and poor service in terms of price, quality, and speed from incumbents, even at larger cities. Yet having fast and costefficient logistics is no longer a competitive edge – it’s a given for e-commerces.

To battle these gaps, larger players such as Amazon and Mercado Libre have already been investing into proprietary logistics infrastructure and tech. Now they have owned distribution centers in key nodes across sizable e-commerce markets, such as Brazil and Mexico.

Startups are looking at building a similar option for medium, small, and micro merchants and suppliers at scale. Some solutions include creating marketplaces aggregating merchants and local suppliers, and offering these same suppliers more financing and efficiency tools.

Amazon and Mercado Libre are outliers. Most of ecommerces are smaller direct-to-consumer brands, and they don't have the time and money to build their own logistics network. They rely on the currently available networks, which already being pushed to a breaking point.

E-commerces could be growing more if there were better last-mile solutions. The present logistics gap will keep affecting merchants more and more if startups don't step in.

Jorge Jiménez, Conectamos

Nearshoring receives a push in LatAm, but challenges remain

Latin America is capturing more and more foreign direct investment through nearshoring (relocating manufacturing and operations to a nearby country) due to a series of factors.

US companies are looking for a closer and more flexible oversight on production, lower their logistics costs and lead times, and evade economic and political risks related to manufacturing in China (including higher tariffs). In 2023, Mexico's share of US imports finally surpassed China's, with a difference of up to 26 days in lead time.

Mexico will start to shrink its workforce due to aging only in 2040, while that movement has been seen since 2008 in China. That has been reflected in labor costs: Chinese workforce wages have steadily risen in the past decade while Mexican wages have remained stable. Not only US but even Chinese companies are relocating factories to Mexico.

US business is more vested and influential in Mexico than China

China -US exportsCAGR('22-28):-1%

Mexico-US exports CAGR(22-28):4.4%

Nearshoring receives a push in LatAm, but challenges remain

Nearshoring is expected to present a \$65B opportunity for LatAm in 2025. And even though Mexico represents the majority (54%) of the nearshoring opportunity in LatAm, other LatAm countries still see the opportunity to seize the remaining 46% of that value.

Yet the region still has challenges to overcome to fully leverage nearshoring's potential. Among developing regions, Latin America and the Caribbean invest the least in infrastructure as a share of GDP – roughly a third of East Asia.

SOURCES

World Economic Forum (Feb 2024); Americas Quarterly (April 2024); The Economist's Nearshoring: A new era of connection for Latin America (April 2024); AMI's Taking measure of Mexico’s nearshoring opportunity (April 2024) and Exploring 2023-2024 Logistics Trends in Latin America (October 2023); Ignacio Arambarri and Santiago Molina in interviews for Latitud.

Total nearshoring opportunity by LatAm country

AMI (April 2024)

Nearshoring is a trend poised to pan out throughout the next decade in three different stages. We're at the beginning of the first stage, which is setting up the infrastructure as a manufacturing hub, from factories and warehouses to energy, gas, and water supply.

The second wave is setting up the suppliers and production. You have to find out how to source raw materials and other supplies across the region to reduce costs, bring in or build the machinery, and connect your production to local supply chains.

The third and final wave is winning over the region. And I believe that due to free trade agreements and higher trust credited to culture and proximity, everybody in LatAm would rather negotiate with Mexico than China, for example.

SANTIAGO MOLINA, FINKARGO

In the short term, nearshoring will continue to accelerate especially in sectors like electronics, automotive, and textiles, where supply chain flexibility and lower labor costs are crucial.

Countries like Mexico, due to its existing industrial base and trade agreements such as USMCA, are likely to be the largest beneficiaries, but other nations like Brazil, Colombia, and even Central America may start seeing more foreign direct investment and production shifts as companies diversify their supply chains.

In the medium term, Latin America could see more structural changes and the growth of regional nearshoring hubs. This will depend on ramping up infrastructure investments in manufacturing, logistics, and technology, plus stronger integration within the global supply chain.

Ignacio Arambarri, Finanex

Cross-border e-commerce is a \$70B market in LatAm, and conquering larger shares

Near or far, offshoring production leads to the rise of cross-border ecommerce. And LatAm can be both an exporter and a consumer.

US and Asian merchants such as Amazon, Shein, and Shopee have established footholds in the region due to its sizable, digitalized market. Local marketplaces have also embedded international shipments inside their platforms, from Brazil's Magazine Luiza to Mexico's Coppel.

LatAm's cross-border digital commerce market stood at \$70B in 2023, doubling in just two years. By 2026, the market is estimated to soar to \$144B, at a 27% CAGR (above what we see in traditional e-commerce).

That means cross-border share will become more relevant, going from 14% to 16% of online sales volume between 2023 and 2026.

Cross-border digital commerce in LatAm will keep expanding

E-commerce and logistics startups apply AI to both front and back offices

In LatAm e-commerce, artificial intelligence is already being used at the front office in applications such as ad optimization, customer support, personalized product recommendations, writing product descriptions, and designing assets.

Darwin Ai Devolut NUVIA yalo

In LatAm logistics, AI is also being developed by leading tech companies in the industry with years of data culture. Unlike e-commerce, most applications are for the back office: forecasting demand for inventory management, pricing and route optimization, and fraud and theft identification and prevention.

F frete.com ifood Rappi

We've been applying artificial intelligence and machine learning at Mercado Libre for years, with hundreds of applications across internal and customer-facing business areas, from coding support and ad optimization in our marketplace to digital identification and credit scoring at Mercado Pago.

In the long run, we expect the cost of models to go down and adoption to go up, to the point where the usage of artificial intelligence will be as intuitive and widespread as electricity, with so many daily applications that they become uncountable.

Renato Pereira, Sr. Director of Corporate Development @ Mercado Libre

Multi-rail payments are the future in LatAm e-commerce

Even though credit cards are by far the preferred payment method in LatAm ecommerce, they already lost majority (48% in 2023 compared to 55% in 2018, when it started to lose share).

The CAGRs for payment methods in the next few years point to a multi-rail payments future, where debit cards, instant payments (with a spotlight on the Brazilian Pix), digital wallets, bank transfer, and Buy Now Pay Later (BNPL) claim larger market shares and inch closer to the credit card share.

METHOD	CAGR2023-2026
CREDITCARD	18%
PIX	26%
DEBIT CARD	30%
DIGITALWALLET	20%
DIGITALWALLET	20%
CASHVOUCHERS	15%
BANKTRANSFERS	38%
BUY NOWPAY LATER	35%

Retail media will go beyond top enterprises and digital channels, worldwide and in LatAm

NRF Retail's Big Show 2024 featured two headlines due to their global maturity: the just-discussed artificial intelligence and retail media.

Retail media allows brands to run ads inside digital retail spaces such as marketplaces, using their data and artificial intelligence applications to better segment ads.

LatAm increasingly sees interest in retail media, with \$2B in forecasted investments for 2024. Brazil and Mexico present the largest forecasted growth rates globally for the year, and retail media's share is poised to grow in the following four years, especially in Mexico, which will reach similar levels to the US.

Retail Media ad spending share in selected countries worldwide, by country, 2024 and 2028

In 2023, the retail media party started. In 2024, the guests actually showed up.

In the US, we now see the expansion of retail media from the largest enterprises to the midmarket, achieving 100+ US companies with a retail media network. We also see retail media going from digital to physical spaces through digital activations.

LatAm sees similar movements, yet lives with larger market fragmentation and underdigitalization. So the rise of retail media in the midmarket accompanies the rise of aggregators to achieve the necessary customer reach for advertisers. On the other hand, the rise of retail media inside physical stores should turn out to be even more important in LatAm, as digital penetration still has to catch up to US levels.

Gabriel Monteiro, Newtail

E-COMMERCE AND LOGISTICS: THE opportunities

LatAm B2B e-commerce will see opportunities, challenges, and verticalization

As B2B companies represent a sizable market – and as they get progressively digitalized, there's an expectation that they'll increase the adoption of solutions that include B2B ecommerces/marketplaces. The challenge is players evaluating the time and cash necessary to achieve optimal demand and supply, and proving their unit economics in the long run.

These marketplaces will probably bet on niche plays through verticalization – since in B2B, both parties have particular sales processes and workflows that need to be addressed in their digitalization process.

Vertical marketplaces, that trade economies of scale for industry share, can be born from or expand to SaaS and Fintech solutions to drive up retention and revenue – what's important is starting by dominating the control point.

Beauty moraDo.

Construction山 Licify TUL

Drugstores

Logistics Ffrete.com nuvo cargo

Restaurants

Changing taxes and regulations

E-commerce and logistics taxes and regulations are constantly changing in LatAm, and that concern needs to be multiplied as players bet on cross-border commerce (inc. nearshoring). Startups need to understand and adapt to specifics such as weight and length limits, import restrictions on certain products, tax exemptions of variances per province or state, and customer protection laws.

Security

Latin America experiences a 20% e-commerce revenue loss due to fraud, putting it only second to Southeast Asia on this measure. With 3.7% of orders being fraudulent, players must constantly invest in updated systems and identification and transaction verification measures to differentiate fraudsters from victims, adapt to fraud innovation, and curb automated fraud attempts.

Logistics players, on the other hand, have to invest in data analysis and tracking technology to curb cargo theft (and insurance to mitigate its financial consequences). In Brazil, cargo theft sees an increased connection to e-commerce: while general cargo theft decreased by 7,9% between H1 2023 and H1 2024, the majority (51%) of robberies that occurred nationwide in the first half of this year targeted the transportation of goods bought from online stores. And as nearshoring has been heating up in Mexico, the country saw a 35% increase in cargo theft between April 2023 and April 2024.

SOURCES
Gartner in AméricaEconomía (July 2024); Magma Partners' Rise of Latin American Vertical Marketplaces (July 2021); Anibal de Frankenberg and Gabriel Monteiro in interview for Latitud.

Infrastructure

The infrastructure gap for Latin America to fully leverage nearshoring (and every logistics initiative with it) is estimated at 2.5% of LatAm's GDP, or around \$150B a year. It's recommended that governments in the region actually invest between 4% and 8% of their GDP in infrastructure.

This investment entails not only ports, rails, roads, and airports (and the connection between these modals). It also entails telecommunications and information technology; access to consistent, large, and inexpensive electricity; and cargo security measures.

Data and systems gap

To make full use of digitalization, and artificial intelligence in particular, logistics players must fill a data and systems gap. Legacy software must be updated and integrated, together with standardized processes of data collection and curation, to see these tools' full impact on business intelligence and efficiency.

SOURCES

When you look at logistics, from payment to warehousing to delivery scheduling: every digital and physical step of that supply chain needs to be integrated with the systems of other steps, and all of them need to be fully operational inside a single platform.

The challenge is not only building machine learning algorithms or LLMs, but mainly maintaining an integrated data collection and treatment infrastructure. In this sector, the AI challenge is mostly an information and systems challenge – and while training an AI can take days, building the infrastructure necessary to feed a data lake can take years.

PARKER TREACY, COBLI

Everybody talks about AI, but few have the requirement that is a structured data lake. When you look at the segments with tight margins, logistics included, that investment becomes even more prohibitive. On the other hand, that opens an opportunity for startups to offer plug-andplay tools to these industries.

federico vega, frete.com

THE LATAM TECH REPORT

The Future of AI

executive summary

Artificial intelligence's moment has been decades in the making/ Computing, internet, cloud, mobile: prior revolutions set the stage for the adoption of AI (and since Chat GPT's Big Bang in late 2022, GenAI).

The current trend in LatAm AI and GenAI developments for companies is centered around cost reduction and re

In the medium to long term, LatAm AI startups will accelerate said applications all the way to building AIenabled ser

Some challenges for LatAm AI startups include hallucinations, mismatched expectations, short labor supply, and uncertain regulations.

As expected, the interest from both companies and users in educating themselves on artificial intelligence has increased throughout this year.

A sign of this widespread reach of AI is how that knowledge demand is divided between either very superficial or very specialized content. We see a rise of searches in courses both on the basics of Chat GPT and machine learning operations (MLOps).

AI startups are rising to transform segments, LatAm included

the ai-first latam company map

B5B vertical

Camu COBLI WiseCricket

MARKETING
zdvolve
harmony uncouer
winnin

AGRICULTURE &traive

IMPORT/EXPORT A AgentAstra NNauta

CONTENT moises Ursula

DATAINTELLIGENCE

avracrezes docket

FINANCIALSERVICES BHub bircle finvero colektia z.umma

CLIMATE Pachama

SALES/CUSTOMERSERVICE Aassis blip huudns Darwin Ai leal NUVIA Samu.ai PATAGONAI PORFIN.SENZAISnapfi treble.ai VZY yavendio! yalo

DISTRIBUTORS/ WHOLESALE seals

MANUFACTURING COGTIVE PULSAR TRACTIAN

EDUCATION BeConfident LuziayuNA

SECURITY OGabriel 电Metatext ZARV

EDUCATION anyoneAi Lethus Sindria Teachy

LEGAL Legalbank netlex

HUMANRESOURCES LARA slik tako

CONECTAMOS Kig0I

PHARMA extendeal maggu

PERSONAL PRODUCTIVITY tempo Zapia

INFRASTRUCTURE sAptivA

FINTECH
Dhyperplane Magie
*Exited to Nubank.
REALESTATE
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LEGAL

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WORKPRODUCTIVITY

Abstra deco.cx diio InnerAl kodus TurbotimeVerbalista webdraw

FOOD aravita Brendi

RETAIL KKuona

WORKFLOWS

klauvi VISID

HEALTH

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After a boom in 2022, funding to LatAm AI startups is once again picking up…

PE/VC Investment in Latin American AI & Machine Learning, 2019-Q3 2024 (\$M) Source: LAVCA

… But Latin America still takes a small share of global AI investment

Regional share of global investment in AI, 10 past years Source: Crunchbase in Grão's The GenAI Impact in LatAm (Oct 2024)

LatAm AI startups are mostly focused on the application layer

In LatAm, "Traditional" AI has been deriving patterns out of large sets of structured data for a while between capitalized, data-centered companies in some sectors. These models support back-office processes such as credit scoring, underwriting, and fraud prevention.

Much like smartphones allowed the creation of multiple apps, GenAI foundational models that already lowered usage costs and embedded fine-tuning, such as GPT-4o, provide LatAm startups a backbone to now mix and match models and build mostly user-facing products, living in the application layer.

Across the region, 26% to 38% of jobs are now possible to disrupt due to GenAI's capacity to create unique outputs based on unstructured data.

The layers of Generative Artificial Intelligence

Application layer ”takers”

INTEGRATION/TOOLING LAYER"SHAPERS"

FOUNDATIONAL LAYER "MAKERS"

infrastructure layer

A problem that businesses will face is hallucination [inaccurate outputs] due to lack of context. You can put the smartest AI in front of a customer: without any context, it will fail. But most companies in the region don't have documented processes.

And so, the biggest opportunity today for LatAm startup is on this context layer. On top of LLMs, you'll find an interface product for getting context and managing the AI that's talking to the customer.

LatAm AI applications aim at cost reduction and revenue growth

Latin American developers use artificial intelligence tools at a higher rate than the global average, be it Traditional or Generative AI.

Looking at the main usages, we see the rise of startups developing AI Employees for themselves or other companies on two efficiency fronts: cost reduction mostly in the back office (automation, digital labor, threat and fraud detection) and revenue growth mostly in the front office (marketing and sales).

In the short term, it's expected that models become cheaper to use, making the cost of applications go down and companies' adoption go up.

Enterprise adoption of artificial intelligence (% of enterprise respondents)

Every technology, AI included, starts at the back office and works its way out of hallucinations all the way to the front office, where potential downsides are more apparent.

By working in the backstage of healthcare plan providers, we're allowed to employ a mix of traditional and generative AI to maximize our learning (and results) curve.

fabricio valadão, arvo

LatAm AI applications focus on cost reduction and revenue growth: Customer support and qualification

AI-powered conversational assistants can guide customers through the discovery, consideration, conversion, and post-purchase phases 24/7.

In LatAm, companies of every size and sector, B2C or B2B, are already using third-party applications to help qualify leads, clarify simple doubts, provide quotes, schedule meetings, and close sales.

Assis helps solopreneurs rapidly reply to and follow up with their Aassis customers. Integrated with WhatsApp Business, the assistant provides personalized communications and quotes for independent workers to have a marketing and sales team in their pocket.

Darwin AI allows mid-market players in various segments to delegate 50% of their customer conversations via chats and voice Darwin Ai to an AI Employee, automating repetitive and complex tasks and driving up contacts, conversion, and satisfaction.

LatAm AI applications focus on cost reduction and revenue growth: Customer support and qualification

Focused on retail pharmacies, Maggu supports clerks in looking at a customer's history and providing better product recommendations, complimentary offers, and usage guidelines.

blip Focused on enterprises, Blip builds chatbots that lead support, sales, marketing, and human resources communications through social media and messaging apps.

Nuvia streamlines B2B sales, making the entire process from lead generation to CRM updates faster and more efficient. Its intelligent sales agents automate prospecting, engagement, qualification, and meeting scheduling.

LatAm AI applications focus on cost reduction and revenue growth: Product Personalization

One important subsection of customer support and qualification is offering the right product, at the right moment, for the right customer at scale, with marginal to no cost increase.

Recommendation engines have been mostly powered by traditional AI, following decision trees based on customers' data and goals, GenAI can be used in conjunction to explore more avenues based in real-time and synthetic data.

Working in the infrastructure layer, Hyperplane built proprietary foundational models for financial institutions to improve decision-making in risk, collections, and marketing based on first-party data. (Exited to Nubank)

BeConfident provides AI-enabled speakers so that users gain confidence and fluency when speaking English. Its AI tailors the conversation based on users' learning levels and topics of interest.

Extendeal has a team of 11 mathematicians focused on building features based on its data lake of pharmacies' orders. One of Extendeal's AI-powered features is an intelligent product recommendation tool for these pharmacies.

Personalization is often lazy analytics, offering clustered solutions to clustered customers. You have to look at personalization at an individual level, designing predictive models that'll lead to an AI that even goes beyond recommending products.

It's an AI that can educate the consumer on all the product differences and make decisions on their behalf, based on their goals. And there are actual business metrics we can optimize with that, such as increasing growth and LTV plus reducing churn and CAC.

TikTok recommends things based on your likes, tracing a perfect path for you to stay there for hours and consume ads with it. We want to use that same addictive mechanism in teaching.

By modeling what's the next best question to ask the user, they can feel like they're talking to a best friend, and keep chatting and learning the language for hours. Conversational AI companies should be thinking about personalization engines.

LatAm AI applications focus on cost reduction and revenue growth: Content and code writing

Foundational models were primarily designed to generate text, so it's only natural that applications focused on writing are growing faster than applications looking at audio, images, and video.

LatAm applications already support professionals in producing content and coding.

Clarice.ai focuses on writers, helping them write 10x faster with an artificial clarice.ai intelligence that helps to brainstorm ideas and produce from highconversion content to humanized letters.

THEODORA Theodora AI is focused on uncovering and removing biases in writing, helping companies manage reputational risk.

Abstra allows companies to scale with AI-powered, Python-based low-code in areas such as credit scoring, finance, customer onboarding, and revenue ops. Abstra is focused on helping junior programmers at mid-market companies fill their programming knowledge gap.

We've seen coding assistants even before Chat GPT. Now, the models have improved so much that AI can already solve basic coding issues. With that, not only companies can lower their building costs but the interest in programming also grows, as junior professionals know they'll have a co-pilot by their side.

LatAm AI applications focus on cost reduction and revenue growth: Operational optimization

LatAm AI applications are already helping companies to manage various processes in various industries.

Companies can
develop said
applications for the
market or for internal
purposes:

colektia	Colektia uses artificial intelligence to analyze sets of data and elaborate predictive models that boost credit portfolio health, payment collection, and debt repayment.
	Clara uses artificial inteligence to bring automation and insights to its customers,crunching through data and highlighting transactional inteligence data financial teams might have missed.
	Frete.com's marketplace offers Al-powered optimization of pricing, drivers,and routes. frete.com Workers in supported companies saved 80,0o0 hours so far by plugging into the application and automating freight negotiations.
	Loggi also applies artificial intelligence for drivers and route optimization, this time on the last-mile segment.
TRACTIAN	Tractian provides asset management and condition and energy monitoring for factories through an loT solution that combines hardware,software,and Al.

LatAm AI applications focus on cost reduction and revenue growth: Customer support and qualification

pipefy Pipefy AI allows business units to automate up to 85% of their workflows, save up to 40% of their time on tasks, and check insights on performance and KPIs.

Snapfi provides to SMBs AI assistants to run several processes within their sales, accounts receivable, marketing, and logistics areas.

talently Talently facilitates the match between tech roles and candidates. Its AI makes automatic applications based on the candidates' profile, experience, and aspirations.

docket Docket uses AI to optimize the analysis of large and multiple documents, leading to an 80% time reduction in decision-making.

Lexter Lexter.ai automates repetitive tasks for lawyers, such as going through diligence and writing legal documents, leading to an up to 50% increase in team productivity.

LatAm AI applications focus on cost reduction and revenue growth: Compliance and fraud prevention

One of the most well-known applications of Traditional AI detecting and mitigating anomalies, based on large data sets and risk prediction models. The rise of GenAI has boosted both attackers' and defenders' capabilities, creating a race for cybersecurity both as a solution for the market or for internal purposes.

Bayonet has software to protect companies from chargebacks, powered by machine learning. Self-learning risk analysis models monitor transactions to improve payment success rates while still keeping an eye on fraud.

AI reduces time to identify and contain data breaches

LatAm AI applications focus on cost reduction and revenue growth: Compliance and fraud prevention

Incognia reduces fraud and friction through geolocation and device-based identification. Its AI uses said data to determine what's a fraud or not in real-time, and to crunch through data to feed companies' insights in a dashboard.

Arvo provides infrastructure for maintaining payment integrity in the healthcare sector. Its artificial intelligence lets healthcare plan

The financial services company's AI products, developed over the past two years, are expected to generate \$235M in additional cloudwalk revenue. For example, CloudWalk's AI-powered fraud detection system combines predictive analysis models and real-time monitoring, and helped the company avoid \$2B in frauds between June 2023 and June 2024.

Cobli offers a compliance platform for companies in sectors such as telecommunications, energy, construction, and logistics. Through Cobli's IoT solution, cameras capture information that's later processed by an AI to provide more visibility and avoid infractions. COBLI

Ffrete.com Frete.com recently launched Check.AI, an AI product for scoring both drivers and companies. The score is based on a data bank comprised of internal and external background information and evaluations after each delivery through Frete.com.

Both Horizontal and Vertical AI companies kick off in LatAm

Just like SaaS, AI companies can adopt either a horizontal (solving similar pains across industries) or a vertical approach (solving pains specific to a single industry). Both models are taking off in LatAm, offering unique opportunities.

Horizontal AI has the advantage of broader market reach and faster scaling potential, running the risk of diluting expertise. It's also suited for overtaking systems of records, that concentrate data about customers, as it's a similar process across industries.

Vertical AI sees its industry focus as harder to replicate and more conducive to value creation, running the risk of having too small of a TAM. It's also suited for overtaking systems of resources, that manage the day-to-day of businesses, as Vertical AI deeply understands the sector's dynamics.

The decision between horizontal or vertical is not set in stone though. Even horizontal players have some specialization in the form of serving multiple industries but restricting by company size or similar business processes. It's also not uncommon to see horizontal platforms assessing the highest-potential industries after their growth spurt, and then unbundling themselves into verticalized solutions.

We decided to verticalize as soon as we looked at the specificity of the products and the selling process in pharmacies – we're dealing with up to 30,000 SKUs, a lot of them with individual regulations and interactions with other products.

Had we looked at sectors where the sales processes were similar and trumped specificities of products, we'd have gone for a horizontal solution. We were pushed to become specialists.

Although fine-tuning your model with each new user interaction, building integrations with widely-used software, and negotiating scalable rates can provide an edge for first movers, these are not insurmountable barriers to entry.

Both horizontal and vertical AI companies should focus on establishing unique advantages that keep them one step ahead, allowing time to develop their next breakthrough while competition catches up.

joão félix, snapfi

In Horizontal AI, the thesis is about product experimentation and iteration – doing MVPs until you understand the market need.

In Vertical AI, it's about sales strategy and commercial capacity – quickly generate relationships and expand in your category.

MARÍA FERNANDA GONZÁLEZ, HI VENTURES

In LatAm, AI meets WhatsApp as an operational system

Across the region's main markets, WhatsApp sports an 80%+ adoption rate among adults. Companies deploying AI are already looking at that and using WhatsApp as one of or even their main channel of operations.

Customer support and sales

Fintech

Learning

Darwin Ai

ChatClass

SOURCES

André Ferraz, Anna Piñol, Felipe Trevisan, João Félix, Lautaro Schiaffino, Maria González, Pete Flint, and Raphael Machioni in interviews for Latitud.

WhatsApp and Facebook are the most used media sites

	WHATSAPP	FACEBOOK	TIKTOK	INSTAGRAM	X	TELEGRAM
BRAZIL	90%	75%	51%	63%	22%	28%
MEXICo	83%	75%	41%	42%	30%	27%
ARGENTINA	88%	75%	31%	54%	20%	13%

Pew Research Center (Mar 2024)

For solopreneurs selling services, there's no CRM. Their operating system is one and only: WhatsApp. And we have to be right where their OS is.

raphael machioni, assis

AI-Enabled Services: The AI + SaaS market will take over the labor market

In the medium to long term, AI is poised to take over offices. The majority of startups expect 50%+ of processes will be AI-embedded in the future, compared to only 12% being AI-embedded today.

This means the applications seen in the Trends section should be supercharged: all tools workers use will either work alongside them to boost efficiency in risker, more complex, human-preferred processes especially in the system of records (co-pilots), or fully replace them in simpler workflows, especially in the system of resources (pilots or agents).

LatAm startups expecting AI-embeddedness (What % of your startup's processes is AI-embedded today? How will this change in the future?)

AI-Enabled Services: The AI + SaaS market will take over the labor market

One example is content and code. Sequoia predicts content and coding models will get better and better, all the way to reaching a professional level by 2030. AI-generated images and videos will catch up with development and also reach maturity in that timeframe.

It's expected that artificial intelligence support applications such as customer support, content and code writing, and identification will be bought instead of built by companies.

Players who build this from scratch will probably waste money, especially as costs go sufficiently down to make these third-party solutions attractive. Companies can even add their own previous data to make these solutions more effective.

With that, AI building will be restricted to the areas where companies truly differentiate themselves. In our case, we've improved our 1. cargo and driver matching, 2. freight negotiation, and 3. fraud detection with data and then AI applications developed in-house because these are core to our business.

federico vega, frete.com

AI-Enabled Services: The AI + SaaS market will take over the labor market

The fact that lack of technical talent and bandwidth are the two biggest challenges for non-AI companies to adopt AI showcases the difficulty of building in-house solutions, especially regarding non-core applications – and the opportunity for AI startups to step in.

In the medium to long term, we'll see the rise of both horizontal and vertical AI companies using agents to conquer multiple end-to-end workflows. Added, they'll lead to AI-enabled services, promising better, faster, and cheaper solutions.

AI will push the software and the labor + services markets to fuse – expanding the TAM of SaaS with it.

SOURCES

Latitud Founder & Investor Survey 2024; Bessemer's State of the Cloud 2024; a16z's The AI Future is Already Here, It's Just Not Productized Yet (June 2024); Federico Vega, João Félix, Lautaro Schiaffino, María González, Sandor Caetano, and William Cordeiro in interviews for Latitud.

With talent and bandwidth being a bottleneck, co-pilots and agents can evolve to AI-enabled services (What are the three biggest bottlenecks to deploying AI to your organizations?, % of non-AI startups)

Hi Ventures' State of AI in Latin America 2024 Bessemer's State of the Cloud 2024

In LatAm, the impact is almost at \$400B

AI: THE OPPORTUNITIES

Job Role	Average Salary (USD/year)	Workers (M)	Market Size (USD M)	Al Disruption (%)	Market Impact (USD M)
Journalists	$10,000	0.5	$5,000.00	50%	$2,500.00
Translators/Interpreters	$8,000	0.5	$4,000.00	80%	$3,200.00
Research Scientists	$18,000	0.5	$9,000.00	40%	$3,600.00
Professors/Teachers	$12,000	5	$60,000.00	30%	$18,000.00
Doctors	$20,000	2	$40,000.00	20%	$8,000.00
Nurses	$10,000	3	$30,000.00	30%	$9,000.00
Architects	$15,000	1	$15,000.00	50%	$7,500.00
Real Estate Agents	$15,000	1	$15,000.00	30%	$4,500.00
Engineers (Various)	$18,000	3	$54,000.00	50%	$27,000.00
IT Professionals	$25,000	2	$50,000.00	70%	$35,000.00
Project Managers	$25,000	2	$50,000.00	50%	$25,000.00

AI: THE OPPORTUNITIES

Job Role	Average Salary (USD/year)	Workers (M)	Market Size (USD M)	Al Disruption (%)	Market Impact (USD B)
AdministrativeAssistants	$10,000	12	$120,000.00	50%	$60,000.00
HR Managers	$20,000	1	$20,000.00	50%	$10,000.00
Lawyers	$25,000	1	$25,000.00	40%	$10,000.00
Financial Advisors	$30,000	1	$30,000.00	40%	$12,000.00
Accountants	$15,000	3	$45,000.00	60%	$27,000.00
Social MediaMarketers	$10,000	1	$10,000.00	60%	$6,000.00
Marketing Analysts	$15,000	2	$30,000.00	60%	$18,000.00
Sales Representatives	$10,000	6	$60,000.00	50%	$30,000.00
Customer ServiceReps	$8,000	10	$80,000.00	70%	$56,000.00
Total		57.5	$752,000.00		$372,300.00

You're not selling software; you're selling an employee. This is the first time software s making a decision to solve a problem. Going from software to employee is a lot easier to sell, a lot tougher to implement, and a lot more valuable.

For the first time, AI is able to sell outcomes instead of productivity. This is going to create massive opportunities for founders not just in market expansion but also margin expansion, as service margins will become software margins.

ANNA PIÑOL, NFX

As data and tech improve, AI will go from recurrent to unique problems. Automation will keep expanding until it reaches the point where it becomes less expensive and more effective than having a human in the loop.

That point keeps getting further and further – and companies will have to rethink their corporate structure and talent strategy.

SANDOR CAETANO, FORMER DATA @ Nubank, iFood, PicPay

With AI, professionals will also need to be good at setting up and improving agents. In sales, that might look like a sales development representative using AI to build a smart contact list, or an account executive using AI to send simple emails.

That will free employees to focus on relationshipbased skills, such as developing a community or selling themselves and their companies on social media.

JOHN PAZ, NUVIA

Hallucinations

Artificial intelligence players face the constant battle against hallucinations, especially in Gen AI. This is critical in sectors where a wrong output can lead to big losses, such as finance, while sectors like marketing are more open to experimenting with GenAI's creative, probabilistic outputs.

Finding flexible first customers, fine-tuning the model based on discovered problems, prompt engineering, and putting humans in the loop when necessary are some ways out of hallucinations.

Founder vs market expectation mismatch

Most founders see the overall market overhyping AI, with 63% seeing much higher or higher expectations than reality. This leads to problems when defining branding and go-to-market (not to mention customer satisfaction, retention, and revenue down the line).

Founders’ perception on AI market expectations (2024, % of respondents)

When OpenAI launched Chat GPT, everything changed for everyone. It wasn't a question of if I was going to integrate AI or not. It was, "I'm going to do this, so how can make sure it's going to be a safe experience for our users?"

Otherwise, our technology was going to be definitely obsolete and someone else in health was going to do it. So it might as well be us – through well-defined feedback loops, human oversight, and guardrails to mitigate risks.

ANDREA CAMPOS, YANA

High-potential artificial intelligence companies show dynamics that are similar to comparable SaaS companies: they address strong use cases, offer killer applications, and transform underdigitalized sectors.

PATRICK ARIPPOL, ALEXIA VENTURES

AI: THE CHALLENGES

Uncertain regulations on artificial intelligence and data protection The regulatory framework for AI is in its infancy in LatAm. Countries like Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay don't yet have a specific law in place to regulate the use and development of AI – although all have announced regulatory proposals, closer to Europe's Artificial Intelligence Act rather than American legislation on AI.

At the same time, personal data protection regulation also has yet to mature in some of these countries. Chile (1999), Argentina (2000), Uruguay (2008), Mexico (2010), Peru (2011), Colombia (2018), Brazil (2018), and Panama (2019) all have data protection and privacy regulation, mostly inspired by European standards. But multiple LatAm countries have manifested the desire to update their frameworks.

Decisions on both AI and data regulation can have an impact that has yet to be seen on artificial intelligence applications in the medium to long term.

Government AI Readiness Index 2023: LatAm's ahead of the global average

Short talent supply

Latin America lacks technology professionals in general, and it gets worse when we restrict it to data science and machine learning. But alongside the brain drain we're used to seeing in the region, there's also growing interest in tech careers, AI included.

To bridge the professional supply gap, companies will have to scoop talents and invest in training for both Traditional AI development, improvement, and management and for GenAI improvement and management (if it's in the application layer). The good news is that 1. programming has a quicker and less expensive learning curve in comparison to other, infrastructure-intensive scientific careers (e.g. biotech), and 2. AI itself can be used to accelerate this learning curve.

Integration with legacy systems

When catering to midmarket and enterprises, startups can face the challenge of seeing outdated software. Retrofitting or migrating software so that companies can support their AI application can be seen as too large of an investment. The current software might also be siloed per company department, impacting the AI's effectiveness due to lack and/or fragmentation of data.

In the medium to long-term though, we'll see developments in the discussion on whether or not AI will be able to disrupt companies' system of records and become their operational software.

Bias and fairness

Building artificial intelligence that more and more stays away from biases is a constant challenge for AI startups. Conditions to Ethical AI include diverse teams and data, conscious filtering and labeling, and more transparent algorithms.

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the latam tech report: team

b r i a n r e q u a rt h , g e n e r a l pa rt n e r

l u i s a d a l l a c o s t a , i n v e s t o r

v i c t o r c o r t é s , i n v e s t o r

t o m a s r o g g i o, g e n e r a l pa rt n e r

G I N A G O T T H I L F, PA RT- T I M E G P

m a r i a n a f o n s e c a , c o n t e n t l e a db r u n o s e r i , p l a t f o r m

A D E M A R P R O E N Ç A , L E G A L B A N K A L E J A N D R O V Á Z Q U E Z , N U V E M S H O P

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a l e x b u s s e , n x t p

A N N A P I Ñ O L , N F X

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A N D R E A C A M P O S , Y A N A

Bruno Magrani, Investor and former Public Policy @ N u b a n k , M e t a

b r i a n r e q u a r t h , l at i t u d

c a m i l a v i e i r a , q e d

B R U N O C O S T A , A B S T R A

C a r lo s R a m o s , L AV C A

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c i p r i a n o e c h ava r r i a , pa l o m m a

f e d e r i c o v e g a , f r e t e . c o m

c o u rt n e y m c c o lg a n , r u n a

F E L I P E T R E V I S A N , M A G G U

fa b r i c i o v a l a d ã o, a r v o

f r e d d y v e g a , p l at z i

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G a b r i e l M o n t e i r o, N e w ta i l

G U I D O S T E FA N I , E X T E N D E A L

G A S T Ó N I R I G O Y E N , P O M E L O

g u s t av o m a p e l i , k a n a s t r a

G e r r y G i a c o m a n C o ly e r , C l a r a

I g n a c i o A r a m b a r r i , F i n a n e x

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J O Ã O D E L VA L L E , E B A N X

j o ã o f é l i x , s n a p f i

J O H N P A Z , N U V I A

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LU I S S I LVA , C LO U D WA L K

M A R C E L O B E N T I V O G L I O, Q I T E C H

l u i s a d a l l a c o s ta , l at i t u d

MARÍA FERNANDA GONZÁLEZ, HI VENTURES

l u i z r a m a l h o , m a g i e

m á r i o a u g u s t o s á , n g . c a s h

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M A R L E N E G A R AY Z A R , S T O R I

PAT R I C K A R I P P O L , A L E X I A V E N T U R E S

pa b l o v i g u e r a , b e lv o

P E D R O D E PA U L A , A LT I S

PA R K E R T R E A C Y, C O B L I

p e t e f l i n t, n f x

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r a fa e l s ta r k , s ta r k b a n k

leadsales

r a p h a e l m a c h i o n i , a s s i s

R e n at o P e r e i r a , S r . D i r e c t o r o f C o r p o r at e D e v e l o p m e n t @ M e r c a d o L i b r e

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S a n d o r C a e ta n o, f o r m e r D ata @ N u b a n k , i F o o d , P i c Pa y

t o m á s m i n d l i n , t a p i

t o m a s r o g g i o , l at i t u d

S E R G I O S A R A V I A , R E M I T E E

v i c t o r c o rt é s , l at i t u d

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ATLANTIS

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