Mexico’s fintech success represents almost 20 percent of the industry’s total venture investment in Latin America while concentrating talent and demand for innovative fintech services with rising neobank transactions. This financial services alternative offers transparency against mistrusted traditional banking.
The country’s improvement of smartphone usage and internet penetration created a technology-savvy population familiarized with secure and simplified money transaction solutions through devices, creating an adequate environment for fintech options to thrive, making Mexico a leader in innovative fintech hub rankings.
"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 at the 2021 ECHO Mexico Business Forum.
Fintech alternatives offer credit, insurance and remittance alternatives for Mexico’s estimated 40 million unbanked population, who have shown little trust toward traditional banking while contributing to the growing digital wallet transactions which rose an 80 percent during COVID-19 lockdowns.
Mexico’s 2018 Fintech Law also creates an adequate environment for fintechs to expand with the regulation of crowdfunding, cryptocurrencies, Application Programming Interfaces (APIs) and sandboxes for fintech products, aiding users and investors to feel protected and encouraging active participation.
The law’s first phase specifies that banks, fintechs, money transfer services and credit bureaus have to provide open banking APIs to share data with third parties such as ATM locations. The second phase is expected to be published soon by the National Banking and Securities Commission and will cover the sharing of transactional data from users’ bank accounts in addition to loans and other financial products. Under these regulations, there are 52 current authorized fintechs in Mexico with 38 pending approvals.
“According to Statista, since 2019 fintech startups in Mexico have grown 200 percent in digital banking, 117 percent in trading and markets and 57 percent in enterprise technologies for financial institutions. These are clear signs of an industry in full transformation by adopting technology as a means to exchange greater value with their customers,” wrote CEO Enrique González, Nautech MX, for MBN.
However, besides having to comply with a regulatory system, experts at the 2021 ECHO Mexico Business Forum discussed how formulating robust and ethical growth guidelines that fulfill consumers’ interests is one of the challenges that fintech companies have to face individually.
Nevertheless, one traditional bank that has been recently building new open banking APIs to allow fintech companies access real-time information such as ATM locations is Citibanamex, the second-largest financial institution in Mexico, through its subsidiary Banamex.
Citibanamex’s strategy aims to retain existing customers who are susceptible to switching to a fintech company, as this traditional bank seeks to embed its products into fintechs’ channels. In addition, the company believes that open banking could increase financial inclusion in the country with an opportunity to use e-commerce expansion to offer to buy now/pay later products.
“Only 40 percent of the population has a bank account, and the number of people with more than one banking product, for example, savings or loan accounts, is even lower, so there is an opportunity to bancarize more people and to target those who do have a bank account but don’t have a wider relationship with their bank,” said Esteban Dominguez, Director of Fintech Partnerships and Open Banking, Citibanamex.