Why Cross-Border Finance Needs a Rethink in Latin America

Latin America’s growth story has always been underpinned by trade. Whether it’s commodities, manufacturing, or the exploding food exports sector, cross-border commerce fuels employment, investment, and innovation across the region. However, while trade has evolved, the financial systems supporting it remain stuck in the past, often acting as bottlenecks rather than enablers for ambitious businesses. As a founder in the B2B global food trade space, my experience has shown that the need for a modern, scalable financial infrastructure in Latin America has never been more urgent. Here’s why cross-border finance must be reimagined, and how regionally focused innovators can help lead the way. 

Letters of Credit: Outdated with Costly Consequences 

Letters of credit (LCs) are a mainstay of trade finance in Latin America. They provide a framework of trust between buyers and sellers, which is absolutely vital in cross-border transactions. Yet, in practice, LCs are rooted in paper-based processes that demand physical documentation, notarizations and multistep approvals. As a result, deals that could be executed in hours are routinely delayed for days or even weeks. In fast-moving sectors like perishables, such delays are not just an inconvenience, they are a business risk. Missed delivery windows can lead to lost sales or spoiled product. The digitalization of LCs or adoption of alternative, data-driven credit mechanisms is urgently needed. Some fintechs are piloting these solutions, but widespread adoption remains slow, hindered by conservative banking cultures and slow-to-evolve regulations. 

Risk Pricing: Systemic Friction for SMEs 

One of the most glaring weaknesses in Latin America’s financial landscape is the systemic mispricing of risk. Traditional banks often lack up-to-date information about smaller or newer businesses, defaulting to conservative (and expensive) risk models. Viable companies are categorized as high risk simply due to patchy credit histories or irregular documentation. 

Digital platforms with transaction-level visibility can disrupt this paradigm. By analyzing real-time buyer behavior, payment patterns, and order volumes, these platforms can construct more accurate risk profiles. This allows for equitable, dynamic underwriting, and means credit decisions can be based on how a business actually performs, rather than how closely it matches a formulaic credit profile.

Fragmented Compliance: A Hidden Drag on Innovation 

Compliance, especially Know Your Customer (KYC) and anti-money laundering (AML) protocols, is a critical safety net in financial operations. Yet in Latin America, compliance requirements vary sharply from country to country. For fintechs and startups operating regionally, this means onboarding processes and documentation standards must be customized for each market, increasing friction and slowing scaling. 

The strategic opportunity lies in embedding compliance tools into platforms, allowing localized onboarding from day one. Standardizing KYC processes through API integrations, or pursuing regional pacts among regulators, would dramatically decrease administrative barriers and empower more businesses to trade cross-border. 

Embedded Finance: Strategic Differentiator, Not Buzzword 

Embedding financial services — working capital loans, insurance, payment tools — directly into trade, logistics, or e-commerce platforms is no longer just an industry buzzword. In practice, it offers profound value to users and meaningful differentiation for platforms. 

For exporters and importers, being able to quote, transact, insure, and finance a deal all in one environment simplifies the end-to-end process. It also creates a virtuous feedback loop: as platforms gather operational data, they learn more about their users, enabling better, more personalized financial solutions, further embedding themselves in the value chain. 

Embedded finance is especially valuable in high volume, cross-border verticals like food, agriculture and manufacturing, where operational risks and capital needs are highly dynamic. 

Building the Next-Gen Financial Stack for Latam 

To unlock the next era of trade-led prosperity, Latin America needs a new financial stack: 

● API-enabled credit and insurance tools to provide real-time liquidity and protection 

● Unified compliance standards to streamline onboarding and monitoring while respecting local legal requirements 

● Seamless, regionally tailored payment rails that support both legacy and emerging systems 

● Products designed with a regional lens but delivered locally to ensure relevance and compliance

This vision does not require revolutionary technologies, but rather collaboration: between startup innovators, incumbent financial institutions and forward-thinking regulators. The payoff? A trade ecosystem that is inclusive, efficient and capable of driving growth on a truly global scale. 

For every founder, policymaker and industry leader, the message is simple: It’s time to rethink cross-border finance. Latin America’s growth depends on it.