Beyond Neobanks: Latin America's Second Wave of Fintech

Latin America's fintech narrative has been dominated by neobanks democratizing banking for the unbanked. From Nubank's rise to over 100 million users to proliferating digital wallets, consumer-facing platforms have captured headlines and billions in venture capital. Investment reached over US$4 billion dollars in 2024, with fintech accounting for 61% of venture capital in the region. Yet, beneath this story lies a more fundamental transformation: infrastructure fintech with superior unit economics, higher barriers to entry, and sustainable business models. The second wave is here, focused on B2B payments, embedded finance, fraud detection, and alternative credit scoring, reshaping how businesses transact and how credit flows through the region's economy.

The Neobank Paradox: Growth Without Profitability

Consumer neobanks face structural profitability challenges despite massive scale. Customer acquisition costs now range from twelve to thirty-four dollars per user, while interchange revenue remains thin and dependent on fluctuating transaction volumes. Even Nubank, with exceptional US$5 CAC through organic growth, requires enormous scale to achieve profitability. Most neobanks lose money on each customer initially, needing significant monthly spending just to break even. The core problem: when revenue comes from small transaction percentages and customers can switch instantly, building defensible, profitable businesses becomes extraordinarily difficult.

Why Infrastructure Fintech Offers Superior Economics

Infrastructure fintech solves different problems with fundamentally better economics. B2B payment platforms command 2-5% commissions on volumes, substantially higher than consumer interchange. Business customers exhibit lower churn, higher transaction values, and greater willingness to pay for value. The embedded finance market in Latin America will reach US$38 billion this year, and is projected to hit US$50 billion by 2030. Unlike consumer neobanks acquiring users individually, embedded platforms leverage existing distribution through marketplaces and software providers, dramatically reducing acquisition costs while accessing larger volumes. Companies like Mercado Libre operate closed-loop systems across payments, credit, and insurance, while infrastructure enablers provide APIs for KYC, fraud detection, and settlement, monetizing through revenue shares, deposit spreads, and licensing fees from day one.

B2B Payments: Addressing Latam's 15% Problem

Latin American businesses spend 15% of GDP on logistics versus 8% in developed markets. Much of this inefficiency stems from payment friction and fragmented infrastructure. B2B platforms are digitizing supply chains and enabling real-time settlement that transforms working capital. The payments segment processes over US$30 million in transactions, expected to grow 76% by 2027. Real-time systems like Brazil's PIX, with 26 billion transactions in 2022, provide infrastructure for instant cross-border and domestic payments. For SMEs, embedded solutions integrated into ERP and accounting systems eliminate decades of friction, creating stickiness that consumer products cannot match.

Embedded Finance: Turning Every Platform into a Bank

The most transformative trend is embedding financial services into non-financial platforms. E-commerce, delivery, and mobility platforms become financial providers without building infrastructure themselves, leveraging high mobile penetration and regulatory frameworks supporting open finance. API-first providers handle compliance and risk, enabling platforms to launch embedded credit, payments, or insurance in days. This addresses the trust deficit direct lenders face while platforms gain revenue streams and engagement. Economics work for both sides: platforms command 2-5% commissions while infrastructure providers earn through revenue shares without bearing full acquisition costs. SMEs gain access to working capital and treasury tools precisely when needed.

Fraud Detection: The Silent Tax on Digital Commerce

As digital commerce accelerates, fraud has become a critical bottleneck, costing billions annually while undermining user experience. Traditional systems struggle with sophisticated fraud rings in markets with weak identity infrastructure. AI-powered detection analyzing transaction patterns, device fingerprints, and behavioral biometrics in real-time offers superior accuracy. The business model is particularly attractive: customers pay based on volume or risk reduction, creating recurring revenue scaling with growth. Sophisticated fraud prevention enables growth by reducing false positives and improving approval rates that directly impact revenue.

Alternative Credit Scoring: Unlocking Capital Flow

Alternative credit scoring holds transformative potential in a region where over 200 million adults lack formal credit access. Data-driven underwriting models analyze real-time income streams, transaction data, and payment behavior beyond traditional credit history. This addresses the chicken-and-egg problem: without history, people cannot access credit to build history. Embedded lending exemplifies this transformation: platforms offer revenue-based financing within point-of-sale systems or payment processors. Lenders gain transactional data making underwriting faster and more accurate, while borrowers receive capital without leaving their workflow. This has enabled serving over 100,000 SMEs with working capital solutions impossible through traditional assessment.

Why These Categories Are Underinvested

Despite superior economics, infrastructure fintech remains underinvested. Fintech investment reached US$4 billion in 2024, yet most flowed to consumer platforms rather than B2B infrastructure. Infrastructure businesses require deeper expertise and longer sales cycles, making them less attractive to generalist investors seeking rapid user growth. The storytelling is harder — explaining payment orchestration lacks the narrative simplicity of democratizing banking. However, seasoned operators are shifting capital toward these categories, recognizing that companies providing rails, risk management, and credit decisioning often have better margins and more defensible moats than the neobanks they serve.

The Path Forward

Latin America's fintech evolution mirrors mature markets but compressed. The shift from consumer acquisition at any cost toward sustainable models favors companies selling to businesses, monetizing through software rather than interchange, solving the region's structural challenges. With over 1,000 fintechs operating in Mexico alone and 3,000 across the region, the market is consolidating around winners with genuine value propositions. For founders, opportunities lie in specialized solutions: supply chain finance for agriculture, embedded insurance for gig workers, cross-border rails for regional trade. These unsexy categories require deep expertise but address real problems with clear willingness to pay. For investors, the thesis is straightforward: back infrastructure enabling the next generation rather than the services themselves. Look for thesis-driven approaches, operator-led teams understanding both technology and local context, and models demonstrating profitability before massive scale.

Infrastructure as Destiny

Latin American fintech's narrative is shifting from disruption to construction. While neobanks proved digital-first services could serve hundreds of millions, real value creation comes from building sustainable, scalable infrastructure. B2B payments, embedded finance, fraud detection, and alternative credit scoring represent more than categories. They are foundations for the region's digital economy. These businesses enjoy better unit economics, higher margins, lower churn, and stronger defensibility than consumer neobanks, solving fundamental problems affecting every business regardless of market conditions. The opportunity is structural, not speculative. Latin America needs this infrastructure to realize economic potential, and companies building it will define the financial landscape for decades. For those looking beyond neobanks, the second wave offers the most compelling risk-reward in the ecosystem.

Luis Hernández Alburquerque is a pioneering force in corporate venture capital and innovation infrastructure across Latin America. With over 30 years building emerging businesses, structuring investment funds, and commercializing transformative technologies, he founded Scale Radical, a corporate venturing-as-a-service platform serving 30+ leading brands , and serves as managing partner of AIDA Ventures, an early-stage fund deploying capital into fintech, logitech, and enterprise SaaS infrastructure startups throughout the region.