The Digitalization of Mexican MSMEs: Challenges and Opportunities

The Fourth Survey 2023 of Users of Telecommunications Services Micro, Small and Medium Enterprises (MSMEs), presented by the Federal Telecommunications Institute (IFT), provides a detailed overview of the relevance of telecommunications and technologies services in the functionality and competitiveness of Mexican MSMEs. Nevertheless, financial constraints continue to impede their access to these essential services, thereby rendering efforts to integrate them into business operations challenging.

MSMEs are a cornerstone of Mexico's economy, comprising 98.7% of all private companies in the country, contributing approximately 52% to the Gross Domestic Product (GDP), and generating 72% of national employment, according to the National Institute of Statistics and Geography (INEGI). However, not all of these companies are part of the Mexico’s emerging digital economy.

The IFT survey, based on 2,502 interviews with fixed internet and fixed telephony MSME users, was conducted to uncover how they use telecommunications, information, and communications technology (ICT) services. The survey findings reveal that 72.2% of the MSMEs considered fixed internet services as "very important" or "important" for carrying out their activities. A similar percentage, 72.5%, gave the same importance to fixed telephony services. These figures underline the critical need for reliable and efficient connectivity for business operations in today's environment.

Among the main activities conducted by MSMEs through fixed internet are customer service (73.7%), the sale of products or services (66.9%), the purchase of inputs online (64.8%), and the management of government procedures (47.7%). In addition, the report highlights the widespread use of digital platforms, particularly social networks, where 70.7% of MSMEs maintain an online presence. Notably, Facebook (88.8%), WhatsApp (88.4%), and Instagram (40.9%) emerge as the most prevalent platforms.

The survey also reveals that 47.9% of MSMEs use online banking services to streamline financial transactions, and 32.5% use cloud services for data storage and management. Despite this progress, areas for improvement in customer satisfaction are identified, with 14.2% and 10.8% of MSMEs reporting complaints related to their fixed internet and fixed telephony services, respectively.

However, in contrast to the positive outlook presented by the IFT's Fourth Survey 2023, Mexican MSMEs continue to face challenges, like adaptability and financial budget, in achieving the objectives stipulated in the 2013 Telecommunications Reform. This reform mandated the universal digital inclusion policy to aim for 85% of all MSMEs nationwide to have have internet access with an average speed of 42.86 Mbps to align with other Organization for Economic Co-operation and Development (OECD) member countries with the intention of fostering business competition and closing national digital divides..

This struggle is reflected in data from the INEGI, which details that of the 4.8 million SMEs in Mexico, only 19.85% of micro establishments reported having computer equipment and 17.2% reported using the internet for business activities. This is in comparison to 84.65% of small businesses that reported having computer equipment and 81.2% internet. Meanwhile, 95.6% of medium-sized businesses reported having computer equipment and 91.9% made use of the Internet. This data underscores a significant digital divide within the SME sector in Mexico, with only 44% of total MSMEs having access to the internet, a stark difference to the findings reported by the IFT.

In addition to the imperative of digital integration within these companies, the OECD highlights financial obstacles as significant limiting factors to be considered in the adoption of advanced technologies. According to the organization, 85% of MSMEs of MSMEs lack access to financing or financial technology (Fintech), according to data from INEGI. Their data indicates that in 2023, 46.6% of these companies sought financing from various sources including banks, financial institutions, suppliers, or unspecified lenders, yet only 43.2% were successful in obtaining it.

Nevertheless, Jorge Bravo, Managing Director at DPL Group and President of the Mexican Association of Information Rights (AMEDI), highlights the significant progress that some MSMEs have made in their digitalization. 

"SMEs are increasingly adopting digital technologies to improve their operations and competitiveness," said Bravo. "The use of computers, internet, smartphones, payment terminals, and various digital platforms have become essential to their operation. In addition, SMEs are using increasingly advanced services other than Internet access or telephony, such as cloud hosting, cybersecurity solutions, specialized software for operations or collections, marketing tools, and even satellite connections."