Sonect to Make Cash Withdrawals Handy for EveryoneBy Andrea Villar | Thu, 04/15/2021 - 05:00
Q: Sonect’s goal is to create the largest digital ATM network in Mexico. How will you reach this objective?
A: We have three verticals to achieve this. The first is through strategic partnerships with traditional banks. They already have millions of users and a network of corporate clients all over the country. Partnering with a large bank's app and offering its users this solution puts us in the spotlight as a commissions administrator much faster than starting from scratch. If a user logs into their regular banking app and suddenly sees our logo, they know that they can now withdraw cash at any shop in Sonect’s network. It is a way to make our presence felt without executing more robust engagement strategies.
Our second strategy is to build commercial alliances with major brands. Gas station chains are a great example. By creating an alliance with these chains, our users can withdraw cash when they refuel at any of the chain’s stations. The same applies to convenience stores, restaurant chains or any type of business in the country that has an established network of customers. The third vertical is aimed at the general public. We have already started to promote and show users that we are here to support them and that they no longer have to walk 3km to find an ATM or be exposed to the risk of going to a bank to withdraw cash. If a person goes into a restaurant, no one will imagine that they are going to withdraw cash.
Q: What benefits can Sonect offer to its partners?
A: Banks have on average five to 8,000 ATMs around the country. The related cost of maintenance is high and is worst for those ATMs that are not profitable. That said, if a bank partners with Sonect, it can reduce its number of non-profitable ATMs or reduce its monthly maintenance cost with the possibility of generating revenue. This is an extraordinary solution for a bank because it allows the company to grow its reach beyond its current coverage. This solution still has to be approved by CNBV.
For businesses, there are a number of benefits. First of all, handling so much cash increases the risk of theft, likewise, some companies need to hire a cash deposit service, which implies a hefty extra cost. By partnering with Sonect, clients benefit from being able to bank that money every time a user withdraws cash. They reduce the risk of theft and also generate an extra income as the user could pay MX$15 (US$0.75) fee plus VAT for each transaction. The average fee for cash withdrawals in Mexico is MX$30 (US$1.5) plus VAT at multibank ATMs. In these early stages, we are not looking for a big profit for ourselves. We want our partners to benefit, whether they are banks, retailers or users.
Q: What opportunities did Sonect identify in Mexico to believe that its business model would be successful?
A: The opportunity is more than huge. Today, the entire financial muscle in Mexico does not serve 100 percent of the adult population. Even those who are banked sometimes have to travel very long distances to handle their banking transactions. Right now, we are talking about cash withdrawals but in the future, we are planning to offer additional services. We want to break down the limits on banking infrastructure capacity in the country.
Q: What are the main challenges Sonect sees in Mexico to achieve its goals?
A: One of our biggest challenges is building sufficient installed capacity to be able to develop the partnerships we want. Once we have this in place, we want to partner with two or three banks and at least 200,000 businesses to allow our users to withdraw cash almost anywhere. We plan to accomplish this in a maximum of three years. We are just about to apply for the IFPE license from the CNBV. It is a big challenge to comply with all the requirements but our No. 1 priority is to comply with all regulations for the safety of all our users.
At the end of the day, fintechs are 100 percent user-focused. I think we still need to channel more efforts into helping users in Mexico to be better informed about all of the digital tools they have at their disposal to cover their banking or financial needs.
Q: What role do fintechs play within Sonect's strategy?
A: They are incredibly important. I think they are our most immediate business peers. I am sure that in the next few months we will partner with a fintech before we partner with a traditional bank. With the former, there is not as much bureaucracy. They understand the business in an immediate way. On the contrary, traditional banks still have a completely pragmatic way of thinking and it is a very long process to create a partnership. They need to go through the detail of the business model, understand that it represents a direct benefit, talk to each leader, get them to agree and still complete a hundred other steps. Still, they are important partners for us because of their large customer base and the benefits we can both generate.
Sonect is a digital ATM platform whose goal is to simplify access to financial services, for anyone, anywhere. In 2019, it became the single largest ATM network in Switzerland.