One day I drove to the bank three separate times, which was an hour each way. This was mostly Miss Piggy’s fault, although the bank she worked for didn’t help at all.
This was back in 2012 in Panama. At the time, I was investing in land in a remote area of the country where the nearest bank branch was an hour from where I was staying.
I have dozens of nightmare stories dealing with banks from around the world. But one afternoon with Miss Piggy tops them all.
She was my ‘personal banker’ at this bank branch that was in the town of Las Tablas. There was nothing personal about her. She looked exactly like Miss Piggy at about five feet tall and 200 pounds. Her fake eyelashes were so obscenely long that they weighed down her eye lids. Her makeup was so thick that it’s possible she was hiding a freshly shaven face. And she was a bitch.
It was if she was intentionally making business difficult for me. She probably was. I was the new gringo in town that represented everything she hated about what was happening in her world.
One afternoon, after meeting with her multiple times to complete a wire transaction, she decided to really screw me over. She emailed me informing me that I have to sign ‘one last KYC document’ in order to complete the money send.
She Was Setting Me Up
I arrived to the bank and we went back in forth in Spanglish. She finally presented me the document to sign, which I promptly did. Within a second of me lifting the pen off of the paper, she grabbed the document and asked if I was done signing. Yes, I responded.
She quickly grabbed a file that included a copy of my passport and looks up at me. She said, “Lo siento, su firma no coincide con la firma de su pasaporte.”
I stared back at her, not understanding what she was actually getting at. “Olvidaste el punto,” she said.
I didn’t dot the “i” in my last name in my signature, which didn’t match my passport signature.
She then proceeded to cancel the wire transfer and put a freeze on my entire bank account. Then, to put the cherry on top, she informed me that I have to physically visit the bank headquarters in Panama City in order to remove the freeze. Which was a six hour drive away.
This story may sound unrealistic and fabricated. But go ask anyone who has banked in Latin America. It’s a nightmare to put it politely.
LatAm Banks Suck
Whether it’s the drug cartels, US FATCA regulations, corruption, or just ancient technology, the entire banking sector in Latin America is ripe for disruption.
It’s not uncommon to see lines of people outside of banks when you visit countries like Colombia, Brazil, or even Mexico. Simple tasks, like getting your paycheck, often require a multi-hour wait in a line to get your money.
The entire banking industry in this region is built upon bureaucracy, paperwork, and in many cases bribery.
And it’s not just the inconvenience of it all. It’s also bad for the local economies.
When you have inefficient banks, you have inefficient markets. Things like home loans, vehicle loans, and retail investing are not only cumbersome but also extremely expensive.
That’s one of the reasons why Latin American real estate tends to be much less expensive than other parts of the world. It’s so difficult and costly to get a home loan that it drives real estate prices down.
But this is all changing in real time. The collision of the internet, smart phones, and crypto are about to massively disrupt banking in LatAm and around the world.
Crypto Saves LatAm?
In a recent fund update, I explained how stable coins will massively disrupt the banking system. I also mentioned that financial services in emerging markets are especially well positioned to exploit this situation.
The synopsis is that modern banking solutions will involve peer to peer transactions that use superior technology. This will result in less centralization, lower fees, and generally less friction for commerce.
For the individual this saves time, money, and frustration. For the local economy this unleashes commerce to flow more efficiently.
For traditional banks, especially those that don’t embrace this technology, this spells disaster. But for some new finance companies, this is all a huge opportunity… And we can invest in this.
Hidden in Plain Sight
The easiest, and most simple way to get exposure to the rapidly growing world of stable coins is to simply own cryptocurrencies that facilitate these transactions. (The explanation of that, and how I believe the US dollar will see even further adoption into the future, will have to be saved for another day.)
Another way to gain exposure to this LatAm financial disruption trend is to invest in companies that leverage these new technologies. Two that stick out right now are Nu Holdings ($NU) and DLocal ($DLO).
Both of these companies are aggressively implementing pro-crypto initiatives, and even more importantly, making financial transactions throughout Latin America much easier. That’s why they have both been growing at incredible rates and just crushed their most recent earnings reports. As I write this, $NU is up 10% while $DLO is up over 30%, on the day.
What’s even more interesting is their TAM and valuation. Both companies, when compared to traditional banks, have barely penetrated their markets. And when you look at their valuation, they are a fraction of what a ‘normal fast growing tech company’ usually has.
The Crypto Resistance
In the middle of writing this post I had lunch with a good friend of mine who runs a major investment fund. After shooting the shit about how hard it is to be parent we naturally started talking about AI and crypto. Because that’s what you talk about when you’re a middle aged parent, right?
His take on crypto is that it’s a volatile, speculative, mostly worthless asset class. Of course, I tried to argue this for about 30 seconds before giving up. It’s tough to debate someone who manages ten figures.
But that’s the opportunity for those who see what is going on here.
Most people associate crypto with speculative gamblers who are trading internet money for drugs.
In reality, major publicly traded financial companies are embracing crypto and crushing their earnings reports.
They’re coming for you Miss Piggy!
