December 12, 2020

'The Digital Landscape in Latin America Is Evolving Rapidly,' Says GSMA Report

"The digital landscape in Latin America is evolving rapidly," according to a report published by the GSMA, a UK-based organization representing the interests of mobile operators worldwide. "Across the region, enterprises are increasingly using digital technologies to improve operational processes; for consumers, digital platforms are providing new ways to work, learn, shop and interact with society."

Authored by GSMA Intelligence, GSMA's research and consulting arm, The Mobile Economy Latin America 2020, which is available in English and español, forecasts 62 million 5G connections across the region by 2025, representing a near 10% adoption rate. By that same year, 4G will account for 67% of connections.

The report presents three key trends shaping the digital landscape:
  1. 5G: the enterprise networks opportunity. There is a growing trend towards the deployment of private networks by enterprises in sectors such as manufacturing, mining and, utilities. Operators are looking to address the needs of these enterprises with simple, out-of-the-box solutions, capturing early movers in Industry 4.0.
  2. IoT: a local focus. The IoT market in Latin America will reach 1.2 billion connections by 2025, driven by growth in the enterprise segment, mainly for smart manufacturing and smart building solutions. Operators are deploying IoT solutions in the auto, telematics and bioenergy industries and, cities such as Buenos Aires, Santiago, Medellín and São Paulo are implementing smart city initiatives.
  3. The rise of fintech. Smartphone adoption in Latin America will reach 72% in 2020 and 80% by 2025. This landscape, together with other factors such as low banking penetration rates, has led to the rise of numerous fintech firms in the region. Besides providing the connectivity that underpins many fintech solutions, operators are also exploring ways to leverage critical network and distribution assets to capture more value in the fintech space, and contemplating direct investment opportunities in fintech companies.
The report also highlights a series of policy recommendations for the digital transformation of Latin America, including:
  1. Removing legacy regulation and encouraging regulatory simplification.
  2. Fostering dialogue between Congress, regulatory authorities, sectoral policymakers, and the private sector to create consistent national digital agendas.
  3. Building a fiscal policy that encourages investments and the affordability of services and devices.
  4. Planning long-term spectrum policies, focusing on digital inclusion and innovation rather than revenue maximization.
I appreciate how the report provides a few examples of IoT startups across Latin America:
  • Babybe: Connects mothers with premature babies through a connected mattress that mimics the mother's breathing and heartbeat
  • ChoppUp: IoT solution for restaurants and bars to reduce beer waste by remotely monitoring data from dispensers
  • Citysense: IoT solutions for air quality and crime tracking, as well as helping firms understand potential markets through crowd counting
  • Firecity: Interconnects fire alarm systems in real time, notifying property owners and the fire department in emergencies
  • Jooycar: Telematics solution tracking driving patterns, and offering route optimization and maintenance reporting for connected cars
  • Lok: Last-mile logistics solutions based on a network of smart lockers
  • Neltume: IoT solutions to help farmers manage pesticides and moth infestations
  • Sensorbox: Reducing business losses from blackouts through a solution that predicts, monitors and reports problems with power sources
  • Tecrea: Multiple IoT solutions, including real-time alerts and GPS monitoring of livestock

Regarding the rise of fintech in Latin America, the report lists the following factors that are driving the sector's growth:
  • "Rapid adoption of smartphones, allowing more people to access digital financial services. Smartphone adoption in Latin America is set to reach 72% in 2020, from 46% five years earlier.
  • "Lack of access to traditional banking services for large swathes of the population, creating a sizeable opportunity for new entrants. According to the 2017 Global Findex, only 51% of households in Latin America and the Caribbean have an account at a formal financial institution – much lower than the average for Emerging Asia (78%) and the Advanced Economies group (96%).
  • "Enabling regulations that level the playing field between traditional financial institutions and new fintech players. In September 2020, the Colombian Ministry of Finance and Public Credit established a regulatory sandbox to support the growth of fintech firms. Brazil, Chile and Mexico are among other countries that have recently introduced regulatory initiatives for fintech.
  • "Sustained investment in fintech start-ups. In 2019, total funding for fintech startups tripled to £2.1 billion. In the first half of 2020, Latin American fintech firms raised a total of $525 million across 74 deals, with lending, payments and SME finance attracting the most interest from investors."

And with respect to mobile bringing more people online, the report notes:
The Covid-19 pandemic has cast a spotlight on connectivity and its role in sustaining social and economic activity in today's increasingly digital society. Lockdown measures at the peak of the crisis resulted in many everyday activities moving online – a situation likely to continue to varying degrees for as long as the threat of the disease persists. This underscores the need for universal access to reliable, high-speed connectivity to ensure everyone is able to stay connected. It also emphasizes the need for a range of relevant digital content and services that meet the socioeconomic, cultural and lifestyle needs of local users.
In Latin America, mobile technology continues to play a key role in bringing unconnected populations online and providing a platform to create, distribute and consume life-enhancing digital services.

What opportunities do you see in developing products and localized services for the Latin American market?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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