Latin American fintech startups are finally seeing a turnaround in funding, with 2024 already surpassing last year's investment totals. According to PitchBook data, $2.6 billion has been invested across 174 deals so far this year, a 73% increase from the $1.5 billion invested across 241 deals in 2023. This uptick in funding is a welcome change for the region, which had been experiencing a decline in investment since 2021.

Mike Packer, a partner at fintech-focused QED Investors, had predicted that 2024 would mark the bottom for funding to Latin American fintech startups. While the journey hasn't been a straight shot up, Packer's prediction may still have come true. The current numbers, although not as high as the $7.5 billion invested in 2021 or the $4.3 billion invested in 2022, indicate a significant increase in funding volume.

The resurgence in funding can be seen anecdotally, with several notable fintech deals closing in Latin America this year. For example, São Paulo-based Conta Simples raised a $41.5 million Series B led by Base10 in January for its expense management and corporate card software. In May, Félix Pago raised $15.5 million to help Latino workers send money to family in Latin America. Brazilian AI fintech Magie also raised $4 million in a round led by Lux Capital, marking Lux's first investment into Brazil.

According to Packer, the increase in funding can be attributed to two main reasons. Firstly, Latin American fintech companies that raised funds in the hype of 2021 are now resurfacing to raise their next round. Secondly, his firm is seeing fintech companies in their portfolio hitting milestones and ready to head back out to reach their next level of growth. "You had companies that were starting to get profitable, and were reaching interesting scale at the beginning of this year," Packer said. "We thought deal volume was going to pick up in terms of quality and quantity."

Nicolas Szekasy, a co-founder and managing partner at São Paulo-based Kaszek Ventures, agrees with Packer that the change in quality of startups looking to raise has been noticeable. Szekasy notes that the first wave of fintech in the region was consumer-focused, but now they are seeing seasoned entrepreneurs building infrastructure businesses. He believes that this influx of quality founders is necessary, as Latin America still needs a lot of innovation in financial services. "Financial services you would take for granted in the U.S. or more developed markets are very immature in the region," he said.

Despite the positive trend, there are still challenges facing the Latin American fintech market. One major issue is the lack of substantial exits in the region. Nubank's 2021 IPO, which valued the neobank at $41 billion, remains the most prominent exit. Mexico, one of the region's most developed ecosystems, still doesn't have a single sizable exit. Additionally, the majority of funding to fintech companies in Latin America still comes from local funds or firms focused on the region, which presents a limiting factor for startups looking to raise.

Packer believes that the region is underfunded coming out of the post-2021 correction. "We need more investors to look at LatAm as a global opportunity and need entrepreneurs to believe that they can make a difference and change things," he said. As the market continues to gain momentum, it will be crucial for investors and entrepreneurs to address these challenges and work towards creating a more robust fintech ecosystem in Latin America.