The coronavirus outbreak could drive financial inclusion in Latin America, as governments look for agile partners to distribute state aid and large segments of the informal economy grapple with restricted access to cash.

Digital banks and e-wallets could see an uptick in overall demand in different countries as quarantine and social distancing measures are rapidly turning digital transactions into a necessity in a region with a longstanding preference for cash, and where nearly half the population is unbanked.

"It's time for the fintech slogan of financial inclusion to truly come into play," Argentina's Fintech Chamber President Ignacio Plaza told S&P Global Market Intelligence. "If the government keeps relying on us to help them distribute this aid through fintech wallets, people will start to use them more and more and become acquainted with their practicality and power," he added.

Plaza confirmed that fintech wallets and banks have been reporting strong growth in accounts and money transfers between individuals in general. "In Argentina, cash is used a lot, but in a context of not being able to move, people look for alternatives," he said, referring to the country's full lockdown, which began March 20.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

In January, the newly elected Argentine government had passed stricter regulation for financial technology companies. But with the onset of the coronavirus pandemic, Alberto Fernández's economic team now looks to partner up with them in order to hand out a 10,000-peso emergency benefit to the country's unbanked informal-sector workers. To do so, virtual wallets such as Ualá and MercadoLibre Inc.'s Mercado Pago were authorized as disbursement channels.

While Mercado Pago expanded to include 7.9 million mobile wallet clients across the region by the end of 2019, digital banks have also established firm footing in Latin America. In Brazil, Nubank became a leading case of a challenger bank that has become a key player in the banking sector. While it is still early to assess the impact of the coronavirus on the region's biggest digital lender, the bank says it is ready for what may come.

"Nubank is well prepared to face [the coronavirus] in terms of financial, tech and human resources, offering 23 million customers an ongoing, stable and transparent service. Since the beginning of the pandemic, the rate of digital account creation remains stable, growing day by day," the bank said in a statement.

Brazil's central bank has recently allowed fintechs to issue credit cards and to receive financing from state-owned development bank Banco Nacional de Desenvolvimento Econômico e Social, to compensate for the near-paralysis in capital markets, which is the most common source of funding for fintechs. Instead, mixed partnerships are surfacing on state and federal levels.

The municipality of Duque De Caxias, in the state of Rio de Janeiro, is supporting food purchases for the parents of 70,000 schoolchildren by depositing 50 reais per month into PicPay Serviços Ltda. virtual wallet accounts.

For Bruno Diniz, co-founder of fintech consultancy Spiralem and head of the fintech committee of the Brazilian startups association, this is a trend we can expect to see more and more. "We have a good number of fintechs that are ready to help," he said, adding that the sector cannot be overlooked by policymakers.

"[Fintechs] can facilitate aid reaching those who need it most as fast as possible," he said, highlighting fintechs' agility compared to legacy banks.

The question remains whether fintech companies will continue their upswing of the past two or three years, when the sector was the largest recipient of venture capital in the region. Some analysts believe that the current situation will accelerate the adoption of digital financial services for both fintechs and challenger banks.

Fintechs, and particularly highly capitalized ones, are better prepared to take advantage of the situation, according to Thiago Paiva, a product manager at Oyster Financial, an early-stage digital wallet based in Mexico.

Whereas banks in the region are closing down branches and struggling to activate their digital platforms, "fintechs are coming off the back of 2019, a year in which they saw the highest ever investment: they raised more than $2 billion in equity," he said.

Cuenca, a digital bank launched in 2019 in Mexico and which currently has 145,000 clients, saw a 7.1% uptick in accounts opened in March, equivalent to more than 9,500 new users, according to data provided by its press department.

Argentina's Grupo Transatlántica SA's Rebanking, a digital bank launched in 2019, also expanded in March 16% more than in February to reach 115,000 clients. "We saw many people join that had no previous bank account," CEO Stefano Angeli said, pointing to the government's emergency aid for families, as well as their need to carry out transactions digitally, as the main drivers.

According to Angeli, financial inclusion is here to stay, and social distancing will only accelerate the adoption curve. "People who naturally would have adopted digital banking much later when it became something more massive, today are faced with the need to start using it," he said.

Mexico's fintech initiatives stall

Mexico was the first country in the region to sanction a comprehensive regulatory framework for the sector. However, as the coronavirus pandemic continues to spread, the country's banking and financial regulator has put fintech licenses on hold for 90 days, due to a slowdown in their operations.

Meanwhile, there have been no concrete signals from the federal government to partner with fintechs to allocate crisis aid and credit. The government is still distributing aid through traditional channels, including cash deliveries by government staff and physical withdrawals at state and private bank branches, Jorge Sánchez Tello, of the Mexico City-based Fundación de Estudios Financieros, said.

"We are not yet seeing an uptick in digital wallet downloads in Mexico," Luis Silva de la Torre, general manager of Fintech Mexico, commented, adding that the chamber will be asking the government to allow fintechs to access funding from the country's development bank in order to grant "social loans" to vulnerable sectors.

The agility with which fintechs can catalyze and execute credit and open bank accounts is much greater than that of traditional banking, he continued. "So in that sense, the sector can reap some benefit, but we have to see what the government's position will be," Silva de la Torre said.