Investment in LatAm Fintech startups reached $6.1 billion in 2022, and the region continues to demonstrate its potential. Latin America used to be dominated by cash and traditional banks, but it has now turned into one of the world’s key markets for digital finance.
Brazil has led the charge for the past decade, with a surge in homegrown startups and unicorns reshaping the country’s financial system in a variety of fintech subsectors, from payments and credit to digital banking.
However, Mexico is hot on its heels. The combination of huge numbers of unbanked individuals, rural areas with no traditional bank branches, and a young, tech-savvy population creates a real opportunity for fintechs and neobanks that can provide alternative, accessible financial services.
The size of the addressable market in Mexico makes the country a magnet not only for fintech startups but also for international giants, all looking to seize the opportunities that Mexico has to offer. And the potential reward is huge. Fintech has the power to drive financial inclusion, which could in turn turbocharge the Mexican economy.
The ingredients for success
It’s no secret that Mexico has a financial inclusion problem. According to 2022 data from Mexico’s National Institute of Statistics and Geography (INEGI), approximately 53% of Mexico’s adult population was unbanked, which represented about 42 million people who did not have a formal bank account as of May 2022. This hampers economic mobility and perpetuates inequality.
However, while millions of Mexicans remain unbanked, nearly everyone has a mobile phone, which creates a fertile ground for digital-first financial services. And businesses are going digital too, with card payments exceeding USD103 billion in 2023 and continuing to grow at double-digit rates annually. What’s more, many SMEs are excluded from traditional banking, with 95% unable to access credit.
For fintechs looking to enter or expand in Mexico, this combination of exclusion from traditional financial services and widespread smartphone usage presents a rare opportunity to skip past traditional banks and bring millions of people into the financial mainstream through mobile banking.
These factors, coupled with a strong political will from Sheinbaum putting financial inclusion high on her political agenda, including vowing to improve access to credit for individuals and SMEs, mean Mexico is in a strong position to become Latin America’s next big fintech hub.
This opportunity is more than theoretical, with big players such as Brazil-founded Nubank and UK-based Revolut having already announced their intentions to provide services in Mexico.
Building the infrastructure to support success
Still, potential on its own is not enough. For Mexico to become Latin America’s next fintech hub, the country needs to ensure that the rules of the game help innovators thrive rather than hold them back.
The 2018 fintech law was rightly celebrated because it was the first of its kind in the region. However, six years on, it has not kept pace with the speed of change. Instead of allowing new ideas to flourish, the law now leaves startups navigating legal grey areas. Many entrepreneurs are forced to navigate regulations that are either too rigid to allow experimentation or too ambiguous to inspire investor confidence.
If policymakers want Mexico to be Latin America’s next fintech hub, they must start building a regulatory framework that actually works. By updating the law, funding regulators properly, and giving them the capacity to move as fast as the market does, Mexico can create the fertile ground its fintech sector needs.
With the right changes, regulation can become a driver rather than an obstacle, positioning Mexico as a global model for how smart policy can foster innovation and financial inclusion.
Mexico as a success story
Mexico’s fintech success story is well underway, with new foreign and homegrown entrants promising to disrupt the status quo. It is now down to policymakers to create the right environment for fintechs to flourish.
Brazil has led the race so far, but Mexico has the potential to emulate this success, solidifying itself as a global fintech force by pioneering homegrown firms that can solve Mexico’s financial exclusion problem.
The political will and environment are now here, and it’s time for policymakers to enable the country to realise its true potential.
By lowering barriers to entry and delivering accessible, digital-first solutions, fintechs in Mexico have the chance to drive real social impact while unlocking a market with massive growth potential.
Carlos Marmolejois CEO of Finsus, a regulated savings, investment, and credit provider. Marmolejo has a long track record in the Mexican financial sector, with experience in both financial institutions and regulatory entities. He led Banorte’s Afore XXI IT & Operations department for 2 years and was Head of Innovation at Santander Mexico for 4 years. Mr. Marmolejo’s experience at regulatory entities includes a combined 22 years at CNBV and CONSAR. He holds an Engineering Degree and an MBA from ITAM