Fintechs Spawn Smart Home Ecosystems in Emerging Markets
08 December 2023
With more than half of the world’s population still unbanked or underbanked, innovative fintech services provide emerging markets especially with the means to leapfrog other markets as they develop a new financial and smart home ecosystem.
Following the proliferation of the internet in the 1990s and 2000s, fintech companies all over the world created more efficient online payments and credit services. Paypal, for instance, paved the way for quicker payments on online platforms like eBay (which bought the company in 2002 and listed it – again – in 2014). Indeed, ecommerce marketplaces often gave birth to payment platforms. In China, Alibaba gave rise to Alipay and in Latin America Mercado Libre created MercadoPago.
Fintech Services Address the Unbanked and Underbanked
Argentine Mercado Libre (MeLi), a current investment of VanEck Smart Home UCITS ETF, hosts the largest online commerce and payments ecosystem in Latin America. Founded in 1999, it became the first Latin American unicorn, a private company worth more than $1 billion, ahead of listing on the US Nasdaq stock exchange in 2007. MeLi is a force to be reckoned with and one of the most valuable companies in Latin America, with operations spread throughout the region.
In addition to MeLi's original Marketplace trading platform, the company has delivered reliable, low-cost financial services to all, including the previously unbanked, via mobile apps. It offers payment services through MercadoPago, investments through MercadoFondo and loans through MercadoCrédito. About 40% of the merchant borrowers of MercadoCrédito, for example, have never taken out a loan before.1
Brazilian Nubank – a neobank founded in 2013 – took a slightly different route. It was able to capitalize on the average Brazilians’ dissatisfaction with the traditional banks that mostly served affluent individuals who could pay their high fees. With its mobile app and credit card programs, Nubank made banking simple. In 2017, Nubank secured a banking license and launched the ultra-simple savings account NuConta. Compared to traditional banking accounts it is easy to use, with low fees and good customer service.
Nubank became profitable in 2023 and has more than 80 million customers in Brazil, making it the fourth largest financial institution in the country, behind incumbents Itaú, Bradesco and Caixa. More important, as a response to MeLi’s and Nubank’s customer service delivery, transparency and reduced fees, incumbent banks are being forced to change and offer more competitive and digital products, resulting in an overall better experience for consumers.
Spin-Off Effects Benefit Society as a Whole
Maybe more impressing than the financial results and the increased competition, is the new banks’ societal impact. Between 2017 and 2021, bank account penetration in Brazil increased from 70% to 84%.2 The jump is even more impressive when looking at the increased penetration by income level (see graph below). Penetration in the bottom 40% income bracket increased dramatically in the period, from 43% to 68%.3
Account ownership (as percentage of the population 15+) in LatAm jumped between 2017 and 2021, especially among the poorest people
Along with broadening financial inclusion, the success of MeLi and Nubank has another (indirect) benefit. It has resulted in a regional tech ecosystem that is helping to attract and build a self-sustaining pool of skilled engineering and programming talent in Latin America. That ecosystem gave rise to new tech unicorns such as the Colombian delivery and ecommerce company, Rappi, and Brazilian home rental startup, QuintoAndar.
Similar ecosystems have emerged in the US around the big tech companies, in China around superapps from Alibaba’s Alipay and Tencent’s WeChat. With investments in emerging market tech companies, the VanEck Smart Home UCITS ETF anticipates that the smart home ecosystem will benefit from this LatAm innovation power.
2 https://data.worldbank.org/indicator/FX.OWN.TOTL.ZS?end=2021&locations=BR&start=2011&view=chart
3 https://data.worldbank.org/indicator/FX.OWN.TOTL.40.ZS?locations=ZJ&name_desc=false and https://data.worldbank.org/indicator/FX.OWN.TOTL.60.ZS?locations=ZJ&name_desc=false
Important Disclosures
VanEck Asset Management B.V., the management company of VanEck Smart Home Active UCITS ETF (the "ETF"), a sub-fund of VanEck UCITS ETFs plc, engaged Dasym Managed Accounts B.V., an investment company regulated by the Dutch Financial Service Supervisory Authority (AFM), as the investment advisor for the Fund. The Fund is registered with the Central Bank of Ireland and actively managed. The value of the ETF’s assets may fluctuate heavily as a result of the investment strategy.
Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs/KIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the following local information agents:
UK - Facilities Agent: Computershare Investor Services PLC
Austria - Facility Agent: Erste Bank der oesterreichischen Sparkassen AG
Germany - Facility Agent: VanEck (Europe) GmbH
Spain - Facility Agent: VanEck (Europe) GmbH
Sweden - Paying Agent: Skandinaviska Enskilda Banken AB (publ)
France - Facility Agent: VanEck (Europe) GmbH
Portugal - Paying Agent: BEST – Banco Eletrónico de Serviço Total, S.A.
Luxembourg - Facility Agent: VanEck (Europe) GmbH
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VanEck Asset Management B.V., the management company of VanEck Smart Home Active UCITS ETF (the "ETF"), a sub-fund of VanEck UCITS ETFs plc, engaged Dasym Managed Accounts B.V., an investment company regulated by the Dutch Financial Service Supervisory Authority (AFM), as the investment advisor for the Fund. The Fund is registered with the Central Bank of Ireland and actively managed. Investing in the ETF should be interpreted as acquiring shares of the ETF and not the underlying assets.
Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs/KIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the following local information agents:
UK - Facilities Agent: Computershare Investor Services PLC
Austria - Facility Agent: Erste Bank der oesterreichischen Sparkassen AG
Germany - Facility Agent: VanEck (Europe) GmbH
Spain - Facility Agent: VanEck (Europe) GmbH
Sweden - Paying Agent: Skandinaviska Enskilda Banken AB (publ)
France - Facility Agent: VanEck (Europe) GmbH
Portugal - Paying Agent: BEST – Banco Eletrónico de Serviço Total, S.A.
Luxembourg - Facility Agent: VanEck (Europe) GmbH
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