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Consumer Finance in Latin America: Challenges and Opportunities in an Emerging Region
VRL Financial News Publishing, Feb 2010
The Latin American consumer finance market has expanded rapidly over the past decade. Although product penetration remains low, the infrastructure for increased consumer credit is developing and the long term prospects are enormous.
This report analyses the prospects and opportunities in the consumer finance market in Latin America.
Over the past five years, the consumer finance sector in Latin America has enjoyed exceptionally high growth rates and returns. Buoyant economic conditions and rising incomes have fuelled a growing demand for credit among a population eager to enjoy the conveniences and comforts promised by western-style consumerism.
As a result, domestic banks are refocusing their strategies on consumer finance and foreign players are rushing into the market
This report explains:
- Profiles of key products and players
- Emerging consumer trends, including the appetite for new technology
- Successful approaches to banking the region’s significant unbanked population
- The importance of consumer education strategies
- Approaches to credit risk management
- The options for entering the market through acquisition, alliance and partnership
Case studies include; Banamex, Banco Azteca, Banco de Chile, Banco de Credito e Inversion, Banco de Estado, Banco do Brasil, Banco Inbursa, Banco Itau-Unibanco, Banco Santander Chile, Banco Wal-mart, Banorte, Bansefi, BBVA – Bancome, Corpbanca, Falabella, Grupo Financiero HSBC, Grupo Financiero, Santander, Lime, MasterCard, Nexxo Financial, Redecard, Rêv Worldwide, Santander, Tu-Dnro, Visa and Xoom.
Summary
Strong economic trends have caused salaries to rise and have led to improved consumer confidence, resulting in a boom in consumer spending. A growing acceptance of credit is also replacing a traditional aversion towards debt, which has been stimulated in turn by greater availability of loans, aggressive marketing, and more favourable rates and terms in an increasingly competitive market.
However, despite the consumer finance market’s exceptional growth rates, penetration of consumer finance products is still low in comparison to many other countries, and significant growth is likely to continue into the foreseeable future. The region is also exposed to a downturn in world commodity prices. While a number of nation’s political course has been relatively stable in recent years, political risk should not be overlooked either. The nascent infrastructure for consumer credit is developing across the region. Legislation is gradually being put in place to regulate consumer lending, and the credit bureaux system and collections industry are gathering momentum.
Latin America represents one of the most rapidly growing regions for consumer finance providers, owing to expanding economies and increased consumer spending power. Over the past four years, the consumer finance sector in the region has enjoyed positive growth rates and returns.
The key finding of the research is that Latin America hosts one of the most rapidly growing regions for consumer finance providers. Indicators of this include the growth in banking licenses in Mexico and the forecast that Brazil is set to become the world’s third largest card market by the middle of the decade.
The results of this research will certainly encourage new consumer finance providers to pay closer attention to this fast developing market, in particular given the less favourable prospects in many developed nations at present.
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