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Mexico - An Emerging Fintech Market for Startups

Updated: Mar 17

Mexico has been pioneering the Fintech industry, not only in Latin America, but also across the globe. It has positioned itself as an incubator for Fintech startups with high-growth potential and caught the eye of many global investors. In fact, Mexico ranks as the most influential Fintech Innovation Hub in Latin America with the highest potential for growth worldwide. So, how did Mexico become one of the strongest Fintech ecosystems in the world? For three main reasons: a growing digital population, accessible financial systems and a change in legislation, that in turn surged the interest of global investors.


Access to Financial Systems


A report from the National Banking and Securities Commission (CNBV) mentions that less than 50% of the Mexican population actually uses banks. This is a pretty low number, which sheds light on the fact that most Mexicans don’t have access to the financial system and are consequently unbanked.


In addition, the average interest rate for personal loans in Mexico were at a high of 25.5% in 2018, which essentially isolated Mexicans that didn’t have enough income to cover the high interest rates. In turn, this created an environment of unbanked individuals that didn’t have access to the financial banking system.


Digitized Solutions


Combined with the unbanked population of 36 million, we also know that half of Mexico’s population is under 24 years old and is digitally engaged, making it an attractive place for startups and investors that are looking for a piece of Mexico’s Fintech industry for years.

We are seeing several new digital banks pop up in the region like Flink, Albo and Hey. They took interest in the growing ecosystem as illustrated in the Fintech Radar 2019. It showed that the “digital banking” segment demonstrated the highest annual growth of 200%. No wonder companies are quickly flocking to this new frontier of growth.


Changes in Legislation


In March 2018, the Fintech Law was introduced in Mexico. Its main objective was to regulate Fintech companies and jump start the financial services through technology and innovation. It established guidelines to make sure there was fair competition between the Fintech startups and the established financial institutions. But most importantly, the law provided access to financial services, like investing through crowdfunding, access to loans, and secure and better interest rates, to those that didn’t have access prior. It played an important role in the revolution of financial inclusion that was happening in Mexico.


The new legislation opened doors to digital technologies and financial services that individuals wouldn’t have had access to otherwise.


The Opportunity – An Untapped Market


The ever-growing Fintech landscape in Mexico paved the way for major Fintech startups to enter the market. The country has registered an annual growth of 18%, in addition to 394 new Fintech startups, proving itself to be a leader for financial innovation in Latin America. To add to that, the usage of cash has continued to drop in Mexico, where we expect to see in 2 years 55% of cash payments to be transacted through a digital card. The landscape is changing, and people are taking notice.


Some of the most valuable startups in Mexico are candidates to becoming the first Fintech “unicorn” in the country. These include: Konfio, Clip and Kueski, that are each worth between $35 - $102 million. Not only that, the EY Consultancy ranks Mexico as 7th in terms of Fintech adoption, with higher rates than countries like Germany, United States, France and Japan. This accelerated adoption rate, combined with technological advancement in an untouched market, makes it an irresistible hub for Fintech startups.


New Companies Coming to Mexico


According to the Mobile Ecosystem Forum, Mexico is the second largest Mobile market in LATAM after Brazil. Startups are acknowledging the growing potential and rapid Mobile penetration in the country. For example, the Chilean Fintech company, Fintual, is taking its first steps into expansion towards Mexico. They have partnered up with an investment fund manager called Invermerica to penetrate the growing Mexican market.


However, LATAM based startups are not the only ones taking notice of the recent growth opportunities. European and global companies are getting involved as well, like digital banks Revolut and N26, that have reportedly had their eye on the Mexican market for a while now.

Outside of the Fintech startup ecosystem, we are seeing Media companies and Mobile Measurement Platforms (MMPs) take notice of the recent growth opportunities in Mexico as well. Adjust, an MMP focused on fraud prevention, has recognized this opportunity by continuing their expansion in LATAM and opening offices in Mexico City.


All in all, it is because of these aforementioned reasons that Mexico has attracted leading Fintech startups and investors from across the globe. Companies like Nubank and Branch, that provide mobile financial services, have also expanded their operations in Mexico. We expect to see these trends continue throughout 2020 and as the Fintech industry grows worldwide.


If you are interested in learning more about the Fintech industry in Mexico and LATAM, please reach out to us at info@edge226.com.

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