Héctor Cárdenas
CEO and Founder
Conekta
/
Expert Contributor

The Next Wave of Mexico’s Fintech Boom

By Héctor Cárdenas | Wed, 02/24/2021 - 09:14

As an active and avid participant in the financial technology sector, I have been acutely aware of the conversation on banking the Mexican population. It is surely one of the key indicators of financial inclusion, which is not a minor issue in a country where access to service infrastructure is highly unequal. 

Despite the many attempts and programs that have been put in place over the years to bank the population, Mexico still lags behind, even compared to other countries in the region. According to the latest national Financial Inclusion Survey, less than 50 percent of the population has a bank account. Similarly, the penetration of financial services and their use decreases radically for smaller and less populated towns in Mexico. 

In contrast, we have seen a wave of growth in the fintech sector in recent years. According to Finnovista, since 2016, the average annual growth of the sector has been 23 percent. There are now over 400 fintech companies in Mexico. In 2020, there were 14 percent more fintech companies than in 2019. 

If we look at this context panoramically, the following scenario emerges: traditional banking services that are necessary for the overall financial system to function correctly but a population that has yet to adopt these services. 

Simultaneously, we have a population that is highly connected to the internet (over 71 percent of the population has access to it) and that has shown high adoption rates for other digital tools. For example, there are over 80 million smartphone users in Mexico and it has become a relevant market for large social media and streaming-service companies. At the same time, a wave of fintech has washed over Mexico, starting to bridge the gap between financial tools and the market. 

This signals the fact that Mexico is already well into a process of digital adoption. We have successfully integrated many digital tools into our lives. Thinking about this should push us to consider whether the lack of adoption of certain financial tools is due to lack of access or due to lack of relevance. 

In other words: are we doing enough? 
A Shift in Mindset

Access and adoption are two key elements of how we measure financial inclusion. They should remain key elements but we need to radically rethink how we look at these variables.

The lack of adoption of a certain product or service can mean that people have no access to it. But it can also mean that the product or service has not become relevant enough for the public. 

Therefore, when it comes to understanding the adoption of financial tools, we should shift from measuring how much adoption there is among a population, to how well is the specific tool serving the population that it is intended to serve.

By doing this, we will be able to focus on solving the pressing questions that still exist in Mexico, and in Latin America, in relation to financial inclusion. As we start dissecting those answers, we will find that, perhaps, we have not focused our innovation efforts correctly. 

New Technology 

As a sector focused on disruptive innovation, we must continue pushing ourselves to develop the technology that will have the greatest impact on people’s lives. This means leaving the preconceived notions that certain tools will be effective in solving certain problems simply because they have done that in other markets. We also need to let go of the idea that because a tool is useful for a certain population, it will be for other groups as well. 

We are not at the forefront of innovation if we do not consider the needs of our local communities and develop the technology that they need. In other words, the time and resources we invest in developing new tools will be futile if they are only helpful for the tech savvy and financially literate. 

At the same time, we must learn from the current context and avoid repeating similar patterns: access and adoption are key to including more people into the financial system and the digital economy. That is why the technology we develop has to necessarily consider being easily accessible and simple to use or implement. 

The Next Wave

As a sector, fintech companies must continue striving toward rethinking the model, and not just the technology. Currently, a vast majority of the Mexican population is far removed from the “center” of innovation. But they should be the center of it. 

I believe if we innovate thoroughly — rethinking the model to develop the right tools — we will be able to create a new wave of access, adoption and growth for the fintech sector in Mexico and in Latin America. 

The uniqueness of our markets is our strength, and the diversity of our communities should become the inspiration for our strategy. We have the momentum, the talent and the right mindset to turn the inclusion of more people in the digital economy into a key aspect and a turning point for our economies, especially in the post-pandemic era.

Photo by:   Hector Cárdenas