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Mexico Fintech: The Future of Tech and Startups in Mexico

Thinking about expanding your business to Mexico? Consider the fintech industry as it's one of the fastest growing industires in the country.

Blog Author - Justworks
Justworks
Jan 9, 20245 minutes
Blog Author - Justworks
Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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19 1920x1080 The Future of Fintech and Startups in Mexico

Fintech in Mexico has experienced rapid growth, with a surge in digital platforms and innovative financial services driven by a dynamic regulatory environment. The sector continues to play a crucial role in expanding financial inclusion and transforming traditional banking methods across the country.

Mexico fintech accounts for over 20% of total venture funding in the country, with 200+ startups receiving over 600 million in equity financing from investors like Emerging Finance, QED, and Santander Innoventures. Today, over 500 fintech companies are operating in Mexico. Finovista, a fintech and insurtech accelerator, has doubled down on Mexico City, hosting bootcamps like FinTech Mexico City and Scale Fintech.

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What is Fintech?

Fintech, short for financial technology, is technology that provides a wide range of financial services–from personal financial management and mobile banking to QR payments–in an efficient, scalable, and user-friendly way. 

Why Mexico is ripe for disruption in FinTech

As of 2021, Mexico was still lagging behind other markets in the region in terms of the percentage of the population who are banked. Mexico came in sixth in Latin America:

  • 88% in Brazil

  • 82% in Chile

  • 60% in Argentina 

  • 60% in Colombia

  • 54% in Peru

  • 45% in Mexico

Fintech companies are seeing a major opportunity.

  • 80+ million Mexicans use smartphones

  • 80+ million Mexicans have access to internet

  • 9.1 million Mexicans are digital natives (Mexico ranks sixth in the world for the number of digital natives)

  • Electronic bill payments and money transfer volume has increased 80% since the pandemic

  • New account sign-ups for digital wallets and neobanks are up 30% since 2020

“Ley Fintech Mexico”

In 2018, Mexico became one of the first countries around the world to pass legislation related to fintech. The law, known as “Ley Fintech Mexico,” allows the Secretaría de Hacienda y Crédito Público (SHCP), Mexican Banking and Securities Commission (CNBV), and the Central Bank to set parameters for sub-sectors like collective financing, as well as establish standard “sandboxes” for fintech products. The goal of the law is to keep users and investors’ financials healthy. 

While regulations can help build trust, they also can slow progress and hamper innovation. Mexican fintech businesses need to budget for legal and consulting fees so that they can maintain compliance with all of the country’s mandatory regulations. 

The startup ecosystem in Mexico is the second largest in Latin America, trailing behind Brazil. These are the most popular categories in the fintech space in Mexico:

  • Personal finance management (financial management, financial education, financial wellness, robo advisors, financial planning)

  • Mobile banking and electronic payment funds (wallet)

  • Digital lending & credit

  • Digital money transfers

  • Peer-to-peer payment services (Venmo, Cash App)

  • Automated portfolio managers

  • Financial markets and trading platforms (Robinhood)

  • Wealth management

  • Insurtech

  • Crowdfunding or collective financing 

  • Neobanks

  • Financial services infrastructure and enterprise technology (big data & analytics, business intelligence)

  • Cyber security (fraud prevention and identity verification)

  • Digital credit (credit products on electronic platforms)

  • Fraud prevention, identity verification, risk assessment, and scoring

  • Buy now, pay later (BNLP)

  • Real estate

  • QR payments

  • Account/payroll software 

  • Payment gateways 

  • Open banking 

  • Payments and remittances

How the pandemic reshaped Mexico’s financial landscape

Many Mexican citizens have developed a deep distrust of the country’s banking system. Some Mexicans, especially those in rural areas, are unbanked or underbanked, meaning they keep most of their wealth in cash. 

Many people are asking, is cash still king in Mexico?

When the Covid-19 pandemic forced Mexicans to remain at home, a seismic shift occurred in the country. Thanks to the uptick in smartphone and internet usage, more transactions started occurring online. This prompted more Mexicans to sign up for debit or credit cards and lead the country’s change from being a cash-based society to embracing a digital economy.

Many fintechs are now aiming to acquire  people without accounts. However, most fintech products still required users to visit a brick-and-mortar bank store. 

The shifting economy means more businesses need crowdfunding, private debt placements, and mezzanine debt. Additionally, more customers are embracing traditional banks and financial institutions.

Mexican fintech goes global

Mexican fintech businesses have started expanding to the Caribbean, Central America, South America, and beyond. Mexican fintechs have a strong presence in Colombia and Chile, followed by Peru, Brazil, Honduras, Panama, and Costa Rica.

Outside of Latin America, the United States and Canada are the biggest markets for Mexican fintech startups, though they’re building out a strong presence across Europe and Asia as well.  

International payments to the US

When it comes to international relations, the US is one of Mexico’s biggest allies. It’s not surprising, that financial companies ranging from Western Union to Bitso are developing new solutions to send money across borders without unnecessary fees. 

One example includes PagaPhone SmartPay, which allows Mexicans to send and receive money directly from the US with their smart phone’s digital wallet.

Other international examples

Given that so many people across the world speak Spanish, it also makes sense that Spain-based businesses are looking to Latin America, especially Mexico. BDeo, a Spanish startup that specializes in claims process, is partnering with Mexican insurance companies. 

Fintech Businesses in Mexico

Most fintech businesses in Mexico are relatively young and small. On average, Mexico fintechs have the following characteristics:

  • Less than three years old 

  • Fewer than 10 employees

  • Average annual revenue of around $100,000 USD

  • Average equity of around $200,000 USD

How Mexican startups are building their tech stack

Mexican startups are still depending on foreign tech to deliver products and services, especially with blockchain.

Like in the US, Mexican fintech startups still rely on traditional banking infrastructure. However, they are investing in B2B tools and infrastructure, including big data and analytics, APIs, open platforms, and tools for developing mobile applications. 

Impact of Fintech in Mexico today 

No-fee digital banking. Startups like Klar, Kueski Pay, Stori, and Albo are working to find sustainable revenue models that allow them to offer banking services in Mexico without fees.

Full-scale banking. Fintechs like Nubank, Uala, and Revolut are seeking to replace legacy players entirely by offering the full menu of banking services. 

Familiar brands moving into fintech. Like Target and Walmart, Oxxo, a convenience store company based in Monterrey, is entering the fintech scene by launching a banking app.

Government fintech. BANXICO is creating the country’s first Central Bank Digital Currency (CBCD). The government has started distributing benefits via digital wallets and bank deposits. They have also launched a QR code system called: Cobro Digital (CoDI).

Mexico fintech challenges

Regulatory matters. Santander Mexico, the Embassy of the UK in Mexico, Finnovista, and Google conducted a study revealing that Mexican fintech startups will need to cut through a significant amount of red tape to succeed. 

Underbanked population. A significant portion of the population remains underbanked. 

Bias towards the metropolitan elite. Mexican fintech users are largely composed of middle- and upper-class people in places like Mexico City, Monterrey, and Guadalajara. This means that the poor rural communities that desperately need new financial products still lack access.

Examples of Fintech companies in Mexico

  • Bitso

  • Arcus 

  • Creze

  • Moneta 

  • Qiip 

  • Fondeadora 

  • Conekta 

  • Minu 

  • Monific

  • Blummon Pay 

  • Klink 

  • Score 

  • Cincel 

  • Maslow 

  • Abaccor

  • Graviti 

  • Mendel 

  • Creditas 

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From access to top talent pools around the world to streamlined international hiring processes, the advantages of working with an EOR (and using Justworks) are undeniable. Get started today

FAQ

How many Fintechs are in Mexico?

There are 650 fintech start-ups and businesses scattered throughout Mexico. 

Which country is best for Fintech?

The two best countries for fintech startups in Latin America are Mexico and Brazil. 

What areas are the best for fintech in 2023?

Historically, the best areas for fintech in the world are Silicon Valley, San Francisco, New York, London, Hong Kong, and Singapore. However, Mexico and other areas in Latin America are consistently being ranked as the best places to expand a fintech business in 2023. 

What is Mexico’s Fintech law?

Mexico’s fintech law is a provision that requires companies to publish reports explaining their financial activities on their companies website. The key component of the law requires EMIs, including all other FTIs, to explicitly state that no government agency will guarantee or be liable for any funds or assets used in any transaction with an EMI.

What are 4 categories of Fintech?

The four major categories of fintech are: digital lendings, payments, blockchain, and digital wealth management.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Justworks
Justworks
Jan 9, 20245 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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