Banking Sector Needed for Economic Reactivation: ABMBy Gabriela Mastache | Wed, 05/13/2020 - 12:42
President López Obrador is not the only one presenting its own plan for the economic reactivation of the country. The Mexican Banking Association (ABM) said that it should play a key role in the economic reactivation of the country and that its priority was to provide liquidity to MSMEs.
In a meeting with the President of the Commission of Finance and Public Credit of the Chamber of Deputies, Luis Niño de Rivera, President of ABM, said that the organization was ready to reactivate the three engines of the national economy: consumption, investment and exports.
Niño de Rivera said that the banking sector was ready to restructure existing credits for its users. So far, over 3 million clients in six different banks have asked for extensions to pay existing loans or credit cards. BBVA Mexico, the largest bank in the country, registered over 1 million applications from clients to differ their payments. According to Niño de Rivera, 48 percent of the applications that banks have received correspond to MSMEs, while the rest came from private individuals.
The need for refinancing loans or credit card payments is bound to be present in the coming months. According to a study by Bankable Frontier Associates, 62 percent of people polled in Mexico have registered a reduction in their income as a result of the COVID-19 pandemic, while 54 percent said that their expenses had increased, possibly because they have had to buy more supplies for the quarantine.
Niño de Rivera also said that the program implemented by banks to differ payments would cost around 25 percent of the earnings banks make yearly on account of interests and that they suffer the risk of not being able to collect payments later. Nevertheless, Niño de Rivera mentioned that the banking sector was willing to help all the sectors of the economy. “Today, more than ever, it is indispensable to work together. There is no sector that can get by without any help. We have to collaborate united to face this harsh economic and sanitary difficulty.”
Though the banking sector has been deemed as an essential activity, most banks have opted to close different branches as preventive measures and have boosted the use of digital banking. According to different reports, use of digital banking services grew in 1Q20 around 40 percent when compared to 1Q19. BBVA announced that its digital clients grew from 7.9 million users in March 2019 to 10.7 million users in March 2020. Meanwhile, mobile transactions grew 64 percent in 1Q20, from 76 million in 1Q19 to 124 million. Also, BBVA registered 1.8 million of its clients to the CoDi platform.
Citibanamex also registered an increase in its digital client base, which went from 4.8 million in March 2019 to 6.6 million in March 2020, a 39 percent annual growth. Moreover, the bank mentioned that digital transactions now represent 26 percent of the total transactions that are performed in the bank, while the number of transactions performed at a physical branch went from 27 percent of their total transactions to 20 percent. However, ATMs remain the main medium for transactions, representing 54 percent of the overall transactions volume.