Fintech: Answering Consumer’s Ignored Requests

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From long lines at the bank to high interest rates, the average consumer in Mexico is fed up with the traditional banking system. Recognizing this unaddressed market need, fintechs rose to the challenge and captured a large market. Now they have to grapple with their success.

"The Mexican market is screaming for disruption in its financial and banking markets. This is why so many startups and fintechs are coming to Mexico, since they can provide better products and services," said Aitor Chinchetru, Founder and Co-CEO, Fintonic.

Traditional banks’ continuous reluctance to provide better customer service, coupled with their disinterest in providing financial services and capital access to the greater Mexican population, has come at a cost in the era of digitalization. Fintechs have turned Mexico’s traditional banking model on its head, accelerating the democratization of access to capital that has been historically available to only a small percentage of the population. For the average person, banking translates to high interest rates and a low rate of credit card holders. "Only 15 percent of Mexican citizens have access to credit cards and most of them are high income earners. People should have other options to build a credit history," said Marlene Garayzar, Co-Founder, Stori.

The nascent fintech sector found significant success by disrupting the traditional banking model that had limited finance services to a select few. As market disruptors, fintech companies have deliberately made the financial services market better for the consumer by driving up market competition in a sector that was complacent and reluctant to change.

Fintechs’ emphasis on business to consumer services has driven the rapid growth of many companies but this is not to say that they will completely replace traditional banks. “Undoubtedly, alliances between both parties will have to emerge because the banking infrastructure traditional banks created will not disappear overnight,” said Stefan Moller, Co-Founder & CEO, Klar. An example of this is user demand of cash-outs, which require physical infrastructure that fintechs do not have and is expensive to install.

Challenges still abound, however. Fintechs have to comply with a regulatory system that is incomplete and unprepared to address the needs of the sector. Fintech regulations are still evolving, posing a further challenge that does not concern traditional banks. This requires individual fintech companies to formulate robust and ethical growth strategies with the best interest of their consumers in mind. To do so, companies are placing a salient emphasis on cybersecurity that in necessary to avoid security breaches and maintain consumer confidence. "Disruptors have better technology, especially in cybersecurity, and we have changed users' relationships with financial institutions," said Moller. While companies can attempt to cover all their bases, they are still exposed to the risks of a volatile regulatory environment.

Despite challenges, a revolution is necessary. “Only through pushing the existing limitations can we expect structural change, otherwise we can only expect marginal change,” says Pablo Viguera, Co-Founder and Co-CEO, Belvo. Regardless of company stance, they all benefit from learning and adhering to their clients demands. This is the only fireproof way companies can expect to survive this constantly fluctuating environment.