There’s no doubt that Latin America (LATAM) is on the digital fast track. The region has become such a mecca for tech startups that some countries in the region have been dubbed the “next Silicon Valley” by the press. According to the Association for Private Capital Investment in Latin America, new venture capital (VC) funding in the region quadrupled over two years to $2 billion in 2018. And that number has already been matched in the first seven months of 2019.i Most of these investments are earmarked for technology startups and innovations, so it’s no surprise that the cloud spend is expected to follow suit. In fact, Frost & Sullivan projects that cloud services market in LATAM will reach U.S. $7.4 billion by 2022 at an annual growth rate of 31.9%.ii
What’s driving LATAM’s tech boom?
1. A young, tech-savvy population is increasing the demand for digital services: LATAM has a relatively young demographic with a mobile phone adoption rate (107.5%) that exceeds the world average (104.5%).iii Combined with rising affluence and high rates of smartphone and mobile broadband adoption (see table below), this positions the region well for accelerated expansion of digital services across many industries. Consider these examples:iv
- The top five countries out of 190 countries of Netflix hours watched per customer are in LATAM (Mexico, Peru, Chile, Brazil and Argentina).
- AirBNB’s fastest growing market in 2017 was LATAM with a 148% growth in online bookings.
- LATAM is Coursera’s fastest growing region worldwide for its eLearning courses. LATAM’s e-learning market as a whole is projected to grow to $3 billion by 2023.
To keep pace with this rising demand for new digital services in LATAM, providers will need to find a way to minimize latency to avoid poor user experiences. Achieving this requires an IT architecture that reduces the distance between users, applications and partners as much as possible.
As a case in point, Ingresso Rápido, a ticket sales service provider in Brazil, needed a way to scale its online ticket sales capacity during seasonal spikes. The company could not afford to experience latency issues and poor performance during these peak times. On Platform Equinix®, the company was able to improve connectivity with cloud partners, lower latency and achieve better performance, agility and stability during seasonal demand spikes. The improvements were significant – latency decreased by 94% while simultaneous ticket sales capacity increased from 500 tickets per second to more than 6,000 tickets per second.
The number of fintech companies in LATAM grew 66% between 2017 and 2018.
2. A unique financial environment is giving wings to fintech: The majority of LATAM consumers are unbanked, which opens the door wide to digital banking and payment applications. Moreover, small and medium enterprises, which represent 90% of all businesses in LATAM, are underserved when it comes to financial services. This is leading to explosive growth in fintech, the number one sector in VC investments in LATAM last year: v
- The number of fintech companies in LATAM grew 66% between 2017 and 2018.
- Brazilian startup Nubank, founded in 2013, is now one of the largest digital banks in the world with 12 million users.
- EMarketer predicts that growth in mobile e-commerce in LATAM will outpace the world average by 8.8%.
A surge in mobile transactions across LATAM means increased data traffic between merchants, payment processors, consumers and other players in the digital payment supply chain. The handling of the payment, the ability to recognize returning customers and cross-link potential offers needs to be fast, reliable and secure. To improve the customer experience, businesses need to interconnect all components of their digital transactions at secure points of presence close to users, data, applications, networking controls, clouds and partners. Platform Equinix provides this type of direct and secure interconnection between players in the digital banking and payment ecosystems.
With a footprint of 200+ data centers over 52 markets, including the world’s top financial markets, Equinix hosts the largest multi-asset class electronic trading ecosystem in the world. More than 1,250 companies, including 500+ capital markets firms, are part of the Equinix financial services ecosystem. The Mexican Stock Exchange (Grupo BMV) was the first LATAM exchange to deploy a point-of-presence (PoP) in the U.S. via the Equinix data center, located in Secaucus, NJ, giving it access to the largest U.S. financial services hub for its customers. This PoP also offers direct access to organizations wanting to trade in MexDer, the Mexican Derivatives Exchange, which is part of Grupo BMV. Access to dense financial services ecosystems of partners and users around the world can help LATAM fintech companies improve their customer experience and process bank transactions, payments and stock trades more quickly and securely.
Telecom + ECX Fabric = gateway to the cloud
The tech boom in LATAM would seem to be the perfect use case for the cloud with its low cost, scalability and flexibility. Moreover, cloud and IT service providers continue to invest heavily in infrastructure across LATAM such as expanding subsea cable routes like Monet, Seabras-1 and Curie. However, as I discussed in a previous blog, “How To Connect To The Cloud From LATAM,” remote cloud connectivity poses some unique challenges for LATAM enterprises. At the early stages of adoption, network providers, a critical foundation for digital ecosystems, are leading the way to tackle these hurdles and fuel the initial wave of cloud services:
- Megatelecom, a Brazilian telecommunications company, leverages Equinix Cloud Exchange Fabric™ (ECX Fabric™) to improve performance and expand its service portfolio by building a digital edge next to the largest industry ecosystems on Platform Equinix. As a result, it multiplied its business volume by 10x over the past three years and increased revenue by 50%.
- Mexican enterprises want cloud connectivity solutions that offer more consistent and reliable performance to cloud and IT service providers like AWS, Oracle, Azure and Salesforce. C3NTRO Telecom, a telecom carrier based in Mexico, was able to meet this demand by providing direct, private access to these providers and others through ECX Fabric. By leveraging Interconnection Oriented Architecture™ (IOA™) best practices, C3NTRO empowers its customers to run workloads in the cloud such as data warehouses, enterprise resource planning (ERP), customer relationship management (CRM) or business intelligence and expect the best possible performance. Overall latency is typically reduced by more than 50% as compared to the public internet, and automated, near real-time provisioning now enables C3NTRO to get their customers up and running faster than ever before with improved security, performance and reliability.
To learn more about your LATAM business can tap into the world’s largest ecosystems of interconnected partners and providers, download the ECX Fabric data sheet.
You may also want to listen to the IDC webinar (in Spanish) to learn more about the best way to connect to the cloud in LATAM.
[iv] America’s Market Intelligence, Defending Against Digital Disruption in Latin America, 2019; Business Wire, Latin America $3 Billion E-Learning Market – Industry Outlook and Forecast 2018-2023 – ResearchAndMarkets.com, Aug 2018;
[v] Crowdfund Insider, Why the Next Fintech Wave in Latin America will focus on B2B, July 2019; Business Insider, Nubank raised over $400 million during Series F funding round, bringing its valuation to over $10 billion, July 2019; eMarketer, Global Ecommerce 2019: Latin America.
To keep pace with this rising demand for new digital services in LATAM, providers will need to find a way to minimize latency to avoid poor user experiences.Gustavo Garcia, Global Solutions Architect, Equinix