At least 93 Fintech Firms in Mexico are in Process of Acquiring Financial Technology Institute License: Report

Mexico City I Love You emir saldierna unsplashDuring the past few years, the Fintech sector in Mexico has grown steadily to become one of the “most developed” in the Latin American (LatAm) region, according to a report released in January 2021 by the Comisión Nacional Bancaria y de Valores (“National Banking and Securities Commission” or “CNBV”).

There are at least 93 Fintech firms currently in the process of acquiring a Financial Technology Institution (FTI) license, 59 of which are digital or electronic payment funds institutions and 34 are crowdfunding platforms.

And out of the 93 Fintechs currently pursuing an operational license, 69 are operating under the eighth transitory provision of the nation’s Fintech Law. Only one electronic payment funds institution has received full authorization from the CNBV3 (as of February 2021).

Major regulatory developments in Mexico’s Fintech sector are expected this year, as the first few authorizations should be provided by the CNBV in accordance with the Ley para Regular Instituciones de Tecnología Financiera (the “Fintech Law”) and its related provisions.

Mexico is notably the largest Fintech hub in the LatAm region with over 441 startups, but it’s followed closely by Brazil, which is the second-largest financial technology ecosystem in Latin America.

Last year, the number of Mexican Fintechs increased over 14%, with major growth reported in certain segments such as Insurtech and digital banking services. The LatAm Fintech ecosystem is now a lot more mature with many more active businesses based in Mexico.

Mexico´s Fintech industry includes companies and startups from nearly all segments. However, the country’s payments and remittances segments are (by far) the most established with 90 startups. Consumer lending Fintechs are also prevalent with at least 52 startups focused on offering services in this market. Meanwhile, the nascent enterprise financial management segment in Mexico includes 52 startups, and enterprise technologies for financial institutions has 51 startups, according to data from Finnovista and the Inter-American Development Bank.

Foreign businesses might consider Mexico to be an ideal place for launching Fintech-focused initiatives because of the country’s fairly young and tech-savvy consumers, high availability of Internet services across the nation, and the relatively low penetration of digital financial services.

Aata from the Instituto Nacional de Estadística y Geografía (“National Institute of Statistics and Geography” or “INEGI”) reveals that 30 million residents in Mexico are between the ages of 15 and 29, which is around a quarter or 25% of the country’s overall population.

As first reported by Mondaq, the INEGI has revealed that around 80 million consumers in Mexico now have a reliable Internet connection and over 75% own a mobile phone (with 9 out of 10 or 90% users of cellphones having a smartphone along with an Internet connection).

The World Bank has noted that there are currently around 13.7 bank branches for every 100,000 consumers in Mexico (according to data from the INEGI in 2018) and 68% of consumers between ages 18 to 70 years have access to modern financial services.

There could be several benefits or advantages of launching businesses in Mexico. During the past few years, Mexico has consolidated as the second-largest LatAm economy and has also established a track record of introducing favorable macroeconomic policies. The Secretaría de Hacienda y Crédito Público (the “Ministry of Finance” or “SHCP”) and the Banco de México (the “Central Bank of Mexico”) have also established sustainable monetary and fiscal policies, and have managed to gain credibility in global markets.

Researchers René Arce Lozano and Hogan Lovells from Mexico have noted that the participation of the nation’s public and private sector has helped greatly when it comes to supporting Fintech industry initiatives. The private sector in the country has been focused on introducing legislation that can help the Fintech sector grow even larger and become more inclusive.

In March 2018, Mexico reportedly became the first LatAm jurisdiction to introduce an extensive set of Fintech regulatory guidelines through the enactment of the Fintech Law and its secondary regulation was released in September 2018.

Mexico’s Fintech Law aims to regulate crowdfunding institutions and electronic money and payment institutions. The Law may also apply to other segments such as crypto transactions, Open Banking and the processes involved with launching sandbox programs.

As covered in December 2020, Fintech-as-a=service providers in Mexico are likely to face serious challenges due to new regulations, analysts claim.

Banks in Mexico may follow global Fintech trends by integrating international payment providers and personal finance tools, industry executives have predicted.

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