Financial technology firms haven't displaced traditional banks and insurers in Latin America so much as forced these incumbents to stop paying lip service to innovation and truly transform digitally.

In fact, far from being competitors, many of the region's banks have incubated or partnered with fintech startups that are popping up by the hundreds in Latin America. (Brazil, with over 370 startups, has the largest fintech ecosystem, followed by Mexico with 238, according to Finnovista.)

By partnering with banks, fintechs can have access to a broad customer base and solid funding. Incumbents, in turn, can offer their clients a slew of apps and customer-facing technological solutions that they failed to develop in-house.

In the meantime, a similar but perhaps deeper disruption has begun to take place. Big tech companies like AmazonFacebookGoogle and Apple in the US, Alibaba and Tencent in China, and Latin America's own MercadoLibre are starting to offer financial services.

These BigTechs, which have a large customer base and very deep pockets, have rolled out payment services through mobile solutions (Apple Pay, Alipay, WeChat Pay, MercadoPago) and lending platforms for small businesses (Amazon Lending, MercadoCrédito).

Brett King, the CEO of US neobank Moven, says the threat is huge. "In China, where fintech is ahead of the US and Latin American markets, players like Alibaba/Ant Financial and Tencent/WeChat have had a big impact on depositor and wallet behavior," he says. "Deposits are at 40% greater risk today in China than a few years ago, and not because of other banks, but due to tech."

Of course, it's one thing to offer retail payments and small business loans, and quite another to process transactions for multinational corporations across several jurisdictions. The BigTechs' lack of financial expertise is an incentive for them to partner with incumbents.

"Tech giants would be able to pick and choose their points of entry into financial services; maximizing their strengths like rich datasets and strong brands, while taking advantage of incumbent institutions' dependence on them," said Jesse McWaters, lead author of the World Economic Forum report Big Tech, Not Fintech, Causing Greatest Disruption to Banking and Insurance.   

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