Continuing our look at LATAM’s Fintech markets, let’s take a closer look at the regulatory and tax issues directly affecting Fintechs in Ecuador.
Findexable’s Global Fintech Rankings Report 2021 has Ecuador placed 69th of 83 countries reviewed – an amazing achievement as a new entry. The country ranks 9th in the Latin America & Caribbean region, again as a first-time entry, and Ecuador’s capital, Quito, ranks 15th on this same regional index.
Fintech is not new in Ecuador – in fact the country had its own Central Bank Digital Currency (CBDC) operating back in 2014. While the Dinero Electronico program folded in 2018 without reaching its full potential, as discussed in this 2021 paper from the Latin American Journal of Central Banking, it was the first CBDC based on a mobile platform and proved the concept. The Global Fintech Ranking places Ecuador 6th in the world for maturity of its Retail CBDC project.
As expected, Ecuador’s largest Fintech market is in Digital Payments, with a Statista.com predicting total transaction value of US$7.3 billion in 2022. The lending sector is growing, however, with Mujeres WOW and VisionFund both expanding well in the targeted lending space.
The best-known Ecuadorian Soonicorn, though, is Kushki – founded in 2016 and valued at US$600 million in June 2021. Kushki works to build the platforms and tech infrastructure used by Nubank, Rappi, and the like, to transfer money. Kushki’s platforms allow both domestic and cross-border payments for debit and credit cards, bank transfers, digital cash, mobile wallets and other types of alternative payments.
Ecuador’s internet and smartphone use figures are relatively high for the region and are steadily increasing, according to the Institute of National Statistics and Census (INEC), though further digital infrastructure is required to take this further.
While Ecuador’s Fintech sector is still developing (59 Fintech startups since 2020) it is primed and ready to tap into the almost US$6 billion invested in LATAM Fintech in 2021.
Here are the main aspects of the Ecuador’s legal and tax regimes that affect Fintechs.