Itaú launches neobank in Chile

The financial technology (fintech) landscape in Chile is undergoing significant changes, primarily driven by new financial regulations and the intensifying competition between traditional banks and digital financial providers. Latin America’s largest bank, Itaú, is gearing up to enter the neobanking sector in Chile through the launch of “Itu,” a digital banking venture. This new platform will initially provide users with a virtual account and a Mastercard debit card. This strategic move by Itaú reflects the growing competition posed by digital banks and fintech firms in the region.

Digital-only banks like Nubank have gained immense popularity in Latin America, attracting millions of customers at a low cost of acquisition. Traditional banks like Itaú are responding by reimagining their product offerings and venturing into the digital space with initiatives like Iti, which was introduced by Itaú in Brazil. These efforts are essential to remain competitive in the rapidly evolving landscape of digital banking.

The regulatory environment in Chile has played a pivotal role in shaping the fintech landscape. The implementation of a fintech law in 2023 has introduced concepts related to Open Finance, encouraging innovation and growth within the local fintech ecosystem. Additionally, a legislative proposal to establish a public and free Consolidated Debt Registry is making progress in the Chilean Congress. This registry aims to enhance transparency around individuals’ payment behaviour, potentially leading to improved interest rates for responsible borrowers.

Chile’s fintech association anticipates substantial growth in the sector, with projections of annual investments reaching $400 million within the next two years. This growth is expected to be accompanied by a significant increase in the number of fintech companies, doubling to approximately 400 entities.

Chile stands out in the fintech landscape compared to other countries due to its high level of banking penetration, with over 70% of the population actively engaged in banking activities. As financial inclusion efforts continue to yield positive results, fintech companies are now presented with a promising opportunity to serve small and medium-sized enterprises (SMEs). This expanded focus on SMEs includes offering digital payment solutions, business debit cards, corporate prepaid cards, and facilitating international transactions.

In summary, Chile’s fintech sector is poised for substantial growth, with new regulatory frameworks and increasing competition driving innovation and financial inclusion in the country.