Digital Payments in Mexico: The Path to a Cashless Economy

“Cash is king” has traditionally been the saying in Mexico. Numbers don't lie, and with more than 71 percent of point-of-sale (POS) transactions in Mexico conducted in cash, it seemed that there was still a long way to go to digitize payments.

This theory is changing. With a wave of challenger banks, digital wallets, and POS services emerging in Mexico, consumers are rapidly shifting to digital payments. This shift is driven by a recognition among all stakeholders (the government, industry, and consumers) that cash payments are becoming increasingly costly due to the risks of theft and fraud, especially when dealing with large bills or amounts.

Providing access to payments has been identified as an opportunity to drive progress. The government and private sector have made significant strides to advance inclusive payments. During the last decade, Mexico has promoted the inclusion of more people and businesses in the formal financial system in support of numerous social and economic goals.

An example of this is the National Financial Inclusion Policy (Política Nacional de Inclusión FInanciera), which seeks to improve access to and efficient use of the financial system, develop economic and financial capabilities, and empower users.

This policy advocates digital payments to reduce the use of cash. The Ministry of Finance allows digital payments in different sectors, such as healthcare and hospitality. At the same time, the central bank is encouraging the adoption of Cobro Digital (CoDi, Digital Charging) in retail payments. The policy has the goal of 77 percent of the population in Mexico owning at least one financial product by 2024.

This strategy has been encouraged by private banks. A great example is our partner and CCO Rodrigo Kuri, who is a former executive of one of the largest banks in the country and a strong promoter of the use of CoDi. 

A number of factors have worked together to drive progress: increasing adoption of electronic payments at point-of-sale terminals; increased availability of mobile wallets; new regulations requiring banks to offer low-cost accounts; and greater awareness about and cybercrime risks associated with cashless payment options.

Also, the growth and wide acceptance of fintechs like Clip and Nubank are well documented. This has been a milestone for continuing to drive the adoption of digital payments. 

For merchants and SMBs, digitization is a catalyst pushing this financial inclusion, aAllowing merchants to run their businesses using one platform to seamlessly accept any and all digital payments. 

A very interesting study, conducted by Visa in Mexico in 2021, surveyed SMBs that were accepting digital payments for the first time in their establishments. Seventy-two percent of respondents commented that what had impacted them most by accepting digital payments was the growth of their business. On average, they had an increase in revenue of up to 22 percent per month.

This was not the only benefit that the SMBs declared. With the POS solutions, they increased customer satisfaction and improved how to manage their business. These are huge outcomes that motivate us to seek better solutions for our customers.

However, when we developed our product, we felt that the merchant side was not as well covered, so merchants needed more tools to run a modern small business. Even when food and beverage are among the region's fastest-growing sectors for digital payments, with nearly 600,000 restaurants in Mexico alone.

This is why we decided to place our HQ in Mexico City. Mexico has huge potential in terms of market expansion as one of the Top 10 most-visited countries in the world and one of the hot rising destinations for digital nomads. This represents a great opportunity as one of the fastest-growing regions to digitize. The challenge of lagging on the acceptance of digital payments is more an incentive than a barrier. Without a clear player in the country, the opportunity for success is exciting. 

I am convinced that the acceptance of digital payments in Mexico is growing and will be a determining factor for the growth of the economy and the financial inclusion of the greatest number of people. With the help of technology, this will happen faster than we think.

To achieve this goal, we must promote solutions that generate more trust for both merchants and consumers. The reduction of online fraud and the acceptance of credit and debit card payments in establishments are determining factors for this.