Digital Transactions as the Foundation of the Fintech Ecosystem

Talking about fintech or financial technology is becoming more and more common, not only among people, but also in business matters. In the fintech ecosystem, there are different representations of the services provided, with the main ones being personal finance, digital payments, online investments, crowdfunding and virtual banking. What characterizes all these services and the ecosystem in general are electronic transactions.

For users to fund their wallet, make an investment, buy digital goods and services or shop online, they depend on the transfer of funds to any of the aforementioned services. Digital transactions are often the starting point for any operation of financial technology companies. In Mexico, we have the Bank of Mexico’s Sistema de Pagos Electronicos Interbancario (Interbank Electronic Payment System, or SPEI), in which only traditional banks, brokerage firms, insurers and participants authorized as Sistema de Transferencia y Pagos (Transfer and Payment System, or STP) can operate.

The main element that the fintech ecosystem needs is immediacy. Transactions need to be reflected in just a few seconds, regardless of the day or time they are made. It is part of the experience that the user is used to — can you imagine having to wait more than an hour for our payments, transfers or digital funds to be reflected?

Beyond just moving money from one platform to another, there is a lot at stake behind these operations; mainly, security, and not only of the money itself. We must also take into account the large amount of sensitive personal data that can be handled, requiring a great infrastructure to protect this sensitive and very valuable information for any company.

Although the growth in digital transactions has been exponential and the pandemic has accelerated it, there are still many obstacles to overcome: informality, financial exclusion and the scarce digitalization of MSMEs are factors that are on the side of companies. According to a study by Americas Market Intelligence (AMI), it is estimated that the banked population in Mexico went from 37 percent in 2017 to 45 percent in 2020; we are still far below Brazil, where financial coverage increased to 88 percent, or Chile, where it increased to 82 percent.

The financial technology revolution is creating new opportunities. By digitizing services and business models, fintechs provide new tools that provide access to financial services to a huge underserved population.

As I mentioned, SPEI works in Mexico, but Banxico also has Cobro Digital, better known as CoDi, a tool with which electronic transfers can be made by scanning QR codes from bank and financial institution applications, as well as through push messages (direct to third-party banking applications).

During the pandemic, people needed contactless payment tools and CoDi represented a great option, not only as a digital payment method but also as a secure payment method, as no physical contact with a person is required to carry out a transaction. A QR code is generated and the customer scans it with their mobile phone in the CoDi section of their banking app, accepts the charge being applied and that's it, the electronic payment is done.

The advantages of this method are many, both for the merchant and for the user: the transfers are in real time, the merchant does not have to wait 24 or even 36 hours to see the funds reflected in his account, which allows him to have liquidity and everything is registered, providing better accounting control and with fewer errors. For users, the advantages are to have a good experience when buying/paying and that their transaction is reflected in seconds, without the need to download a proof of payment. You can easily credit your transaction with the merchant, there are no restrictive dates or times to make transactions and the service is 24/7.

As we can see, digital payments are the basis of fintechs, so the importance of having a professional platform or service that solves the issue of these transactions is vital for their business model and to offer a good user experience.

At STP we have 12 years of experience in the market offering a secure, fast and flexible SPEI connectivity solution and we are a fintech authorized by the Comisión Nacional Bancaria y de Valores (National Banking and Stock Commission), attributes that make us the provider of 90 percent of the fintechs operating in Mexico. We are committed to the evolution of our financial system, we have been promoters of CoDi since its inception and we are actively seeking to add strategic partners who, like us, are committed to financial inclusion.