Leveling the Playfield with Digital Payments

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Mexico’s banking infrastructure has undergone a radical change with the arrival of fintech companies that have come disrupt a stagnant finance ecosystem. Spurred by a climate of competition, Mexico’s central bank (Banxico) is doing its part to increase inclusion among those who have been traditionally excluded from financial services through the use of CoDi.

"Our objective is to provide the conditions so all businesses can compete under the same guidelines and rules of the game," said Miguel Diaz Diaz, Banxico. CoDi is a digital payment platform meant to even the playing field and increase competition within the county’s domestic commercial market.

Although electronic payments have been supported by the Electronic Interbank Payment System (SPEI) since 2007, their widespread adoption has been slow but exponentially incremental. While digital services have been widely resisted in Mexico, the COVID-19 pandemic left businesses without recourse, leading them to widely adopt digital services.

From 2019, when SPEI realized 834,000 transactions, the organization observed a 47 percent growth into the next year with 1.23 million, where most of the operations consisted of amounts below MX$8,000 (US$387). This bracket alone experienced a 72 percent growth from 2019, indicating the incorporation of smaller market players.

It is expected for the digital transformation to continue supporting the expansion of this financial service, which is within the reach of approximately 80.9 million people with access to smartphones, according to a study by National Institute of Statistics and Geography (INEGI). In 2020, approximately 17.8 million Mexicans realized a banking activity through an application on their smartphone. It is Banxico’s hope to incite the other 63 million who own a smartphone to become senders and recipients of electronic payments through the simple, non-presential adoption of CoDi.

"Banxico plays a key role in promoting electronic payments across the country," said Diaz.

CoDi is characterized by four main components: efficiency, security, 24/7 access and zero cost. The application was designed specifically to draw in the informal market, which is still heavily relies on cash payments stemmed from an unwillingness to adopt digital payment services because of the commission rates. The app is easy to use, free and provides immediate liquidity in comparison to 24-48 hour waiting periods associated with other providers. Moreover, since this finance infrastructure is maintained by the central bank consumers can be confident that their information is secure. In essence, Banxico has removed the barriers that had previously barred the informal market from participating and using electronic payment services.