News Article

Sonect to Digitize Cash Withdrawals in Mexico

By Andrea Villar | Thu, 03/18/2021 - 15:00

Swiss fintech Sonect, which allows users to withdraw cash from their smartphone, hit the Mexican market this week. For Sandipan Chakraborty, Founder and CEO of the Zurich-based company, a digitalization strategy to foster branchless transformation is incomplete without addressing what he calls the elephant in the room: cash. In Mexico, this is still one of the main methods of payment, which has imposed major obstacles for neobanks. 

In Mexico, over 50 percent of the population remains unbanked and cash still accounts for 90 percent of consumer payments. According to a survey conducted by INEGI in September last year, ATMs are considered the most unsafe public space by Mexicans, followed by public transport. In addition, by the end of 2020, residents of 50,949 localities had to travel more than 7km to access an ATM. 

Sonect currently operates the largest ATM network in Switzerland through affiliates. “We are the fintech that can turn any cash register into a virtual ATM. Thanks to our app that connects users and businesses in real-time and by geolocation, cash withdrawals are easier, faster and accessible from anywhere,” said in a statement Efrain Navarrete, Operations and Finance Manager at Sonect. Founded in 2016, Sonect aims to create the largest ATM network in Mexico. According to the company, by providing easy access to financial services from anywhere, banks can reach more customers while businesses that handle cash can increase profits.

Although in some regions of the world the use of cash declined due to the pandemic, in emerging markets such as Mexico its use only declined by a very small fraction. According to McKinsey & Company, Sweden, the UK and the Netherlands are among the countries with the lowest cash transaction volumes. In 2020, 86 percent of transactions in Mexico were in cash, meaning most banking clients, whether from traditional or neobanks, are still using cash.

But the opportunity is still there. Data collected by Sonect shows that three out of four people would start using mobile banking apps if they allowed withdrawing cash. The McKinsey & Company report found that most payment transactions are likely to rebound strongly as lockdowns are lifted, while the shift from cash to e-payments is expected to continue, especially in developing economies. 

Back in October 2020, Sonect announced a partnership with gig economy-focused fintech Lana. “We are super excited to kick off our Mexican journey with Lana. They are the ideal partner to support our expansion and help us bring our service to a bigger audience. At Sonect, we focused all our forces on expanding internationally in 2020. Signing a partnership agreement with Lana is a significant milestone for us, and it shows that we are reaching our ambitious strategic goal for this year,” said Chakraborty.

“Although Lana and the products offered in its marketplace are fully digital, our customers still rely on cash to pay at traditional retail stores or street kiosks,” said Pablo Muñiz, Co-Founder and CEO of Lana. Besides this partnership, Sonect in Mexico has already allied with Arca Continental, Yomp!, the National Chamber of the Baking Industry (CANAINPA) and banking companies, including Enso. 

Andrea Villar Andrea Villar Journalist and Industry Analyst