The Fintech Revolution in Mexico Is Only Just Beginning

You can watch the video of this panel here.

As one of the least banked populations in Latin America, Mexico has attracted the attention of neobanks, which have come into the country to challenge traditional banking. In 2019 alone, more than 394 fintechs were registered in Mexico and this number grew to 441 in 2020, according to Fintech Mexico. In addition, last year the five main Latin American markets received a total of US$8 billion in financing for fintechs, of which Mexico attracted US$1.3 billion. As more competitors enter the market, the opportunity to reach those underserved by the financial system has increased but getting there will not be possible without a customer-centric strategy and a long-term vision, agreed panelists on the second day of the Mexico Business Forum 2021 Virtual Edition. “A few years ago, traditional banks dominated the sector. Today it is clear that fintech is a strong player and is here to stay,” said Iñigo Rumayor Belausteguigoitia, Co-CEO at Arcus.

Greater internet access, regulation and the opening of digital accounts are some of the factors that have boosted the fintech ecosystem in Mexico, said Cristian Huertas, Country Manager at Bnext. “Also the traction that companies like Rappi or Nubank have generated in Latin America has helped other players in the region to continue raising capital,” he said. “Companies from other countries have arrived because traditional banks have not fulfilled their task here. That is why we have grown as we have done so far.” 

Brazilian fintech Nubank, which now has over 35 million customers worldwide, approached the Mexican market in 2019 after discovering that many of the elements that made its product a success in its home country were also present in this region. “Mexico is a very profitable region where no new players have been able to enter. It has a population of more than 127 million and a giant economy of more than US$1 trillion,” said Emilio González, General Manager in Mexico of Nubank. “On top of this, there is a poor quality of service in the financial system, both online and in-person.” The people who are looking for 100 percent financial services today, said González, are digital natives, who are the ones driving the adoption of these platforms. 

The opportunity to expand into Mexico was also seized by Argentinian-based fintech Ualá, which brought its product to the northern country in September 2020. “There are more than 70 million people in Mexico who never had access to a digital payment method before,” said Pierpaolo Barbieri, Founder and CEO of Ualá. “These are people who will be left out of the financial system of the future, which will involve more and more transactions that require fully digital payment methods. The cash-only customer is going to be left out of this change,” he noted. At present, Ualá already has more than 100,000 users in Mexico.

Moving the Needle on Traditional Banking

The arrival of fintechs in Mexico has not gone unnoticed by traditional banks, which do not want to be left behind. According to Bnext's Cristian Huertas, the impact this transformation has had on traditional players can be seen in the fact that the big banks are collaborating more, medium-sized banks are trying to compete and small banks are trying to survive or focus on niche markets. “Three years ago one of the top 5 banks in Mexico did not have an app. I could not pay all utilities from my bank. That is absurd,” said Huertas, who added that this has also forced traditional banks to improve the services they offer. “We have significantly changed the plans of many financial institutions and governments. We are working to improve the quality of life through access to financial services, including regulatory initiatives.”