Driving Alternative Payments in Mexico

The payment system landscape in Mexico and Latin America has changed in the last five years. The integration of new payment methods and new companies proposing and integrating these options for users who were looking for payment alternatives that better adapted to their reality and lifestyle were the elements that changed this sector forever.

Such a change would not have been possible without the development and infrastructure of the region's central banks and fintech that sought to use and simplify these tools.

In Mexico, the increase in non-credit card payments is due to growing digitalization and having more users with an internet connection. According to data from the World Bank's Global Findex, the proportion of Latin Americans who have an account has increased from 39% to 73% between 2011 and 2021, while only 28% of Latin Americans have a credit card.

In Mexico, only half of the population is part of the financial system. According to the latest National Financial Inclusion Survey (ENIF), only 49% of the country's population is banked, a reality that leaves open the opportunity for new financing schemes, payment methods, and, finally, better services for customers that are inclusive and more accessible.

That is why the BNPL, or Buy Now, Pay Later, payment method has been successful within the Mexican payment system.

In this regard, the Beyond Borders 2022/2023 study forecasts that this kind of method could reach US$400 billion in volume by 2026 globally. In Mexico specifically, this payment method will grow 82% during 2022.

At Sistema de Transferencias y Pagos (STP), as the Mexican fintech specializing in payment technologies for companies (B2B), we have played a key role in this growth. Our vision is to help companies, SMEs, and businesses in general, to automate their payment methods through SPEI and CoDi®, tools created by the Bank of Mexico (Banxico), so they can make fast and secure electronic transfers.

For example, in the last two years, at STP we have observed that more fintechs and other innovative companies have implemented the BNPL payment modality, thus improving the payment experience of end customers who did not have a credit history.

In addition to streamlining resource allocation to businesses, this payment method also offers an accessible solution to buyers who have been unable to secure a loan from traditional banks for some reason. Now, these buyers can pay their loans through SPEI® electronic transfers to an STP CLABE account. This entirely digital process allows for real-time payments without the need to leave home.

Another payment method that has become relevant not only in Mexico but also in Latin America and developing countries are bank account-based transfers. This method is qualified as a phenomenon in the region, due to its annual growth rate of 86% since 2018.

In this area, STP has played an essential role, because it helps more than 1,500 companies in Mexico, among which are 98% of the fintech companies in Mexico, to connect with Banxico's SPEI, which allows their clients to make electronic transfers in real time. 

Even as the handling of cash continues to be the main form of payment in countries like Mexico, a solution that ends up being digital are money transfers, an example of which is the cash deposits and payments made from stores like OXXO, to the benefit of national e-commerce. 

Consumers are using digital payments, and micro and small businesses frequently use their smartphones to get paid. There are two types of inclusion here, financial and digital, which are growing in tandem with the adoption of digital payments in urban transportation and e-commerce. 

Although the mentioned factors are playing an important role in the new reality of the payment system both in Mexico and globally, generational change is also influencing an economy where new workers are joining the economically active population.

According to Tech Trends to Watch Closely 2022, Buy Now Pay Later experienced a big boost after the pandemic, while the credit card, in recent years, has ceased to be used by members of the millennial and Z generations. 

This generational decision also is close to the lifestyle profile of the new generations that have decided to avoid large corporations, such as traditional banking, because of the commission and annuity charges typical of credit cards.

With methods such as BNPL, the new generations have flexibility and are free of bank commissions and additional charges. 

Taking into account these conditions both in the country and globally among the population that is entering the workforce, market participants that facilitate the development of new payments are key to providing better, fairer, and friendlier services for users.