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Mexico reigns as the largest financial technology hub in Latin America, with 52 fintech companies already operating under the country’s Fintech Law and 38 more pending approvals. Mexico’s fintech ecosystem comprises six main segments: payments, remittances, lending, enterprise financial management, personal financial management, and crowdfunding. 

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Even before the COVID-19 pandemic, when reliance on digital solutions significantly grew worldwide, Mexico’s fintech ecosystem was already thriving as the penetration of smartphones and the internet consistently improved in the country over the past few years. As of 2020, about 54.4% of the population or 70.4 million Mexicans, use a smartphone, making Mexico the eighth country with the highest smartphone penetration globally. 

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With 42 million Mexicans without a bank account, fintech solutions have finally become new vehicles for them to enter the formal financial system. The pandemic additionally created the push for Mexicans to turn to fintech for weather economic fallouts. For example, new account openings for digital wallets and neobanks increased by 30% at the onset of the pandemic. A virtual wallet provider also saw its number of active users increase by 55% in the first four months of 2020. A neobank also reported that 60% of its client transactions were conducted online, a sharp increase from 40% before the pandemic.

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According to S&P Global Market Intelligence, growth in fintech adoption occurred primarily among younger individuals who already have a financial account. In addition, the general lack of trust the Mexicans have in traditional banks also contributed to the shift to fintech solutions.

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Fintech companies play a significant role in widening access to financial products such as credit, insurance, and remittances to previously unbanked and underserved Mexicans. Credit, in particular, is needed to speed up economic activity and attract investments. Fortunately, several lending fintech companies are making it easier for Mexicans to access credit and loans. 

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Konfio, a fintech company that helps small businesses secure loans, recently reached a valuation of $1.3 billion after a fresh investment round where they earned $235 million. The firm reported that it would use its new investments to expand its reach in Mexico.

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In June, online lending platform Credijusto also acquired Banco Finterra, a bank that finances small businesses and players in the agriculture sector, to meet strong demand for digital lending solutions amidst the pandemic, which has heightened the need for credit and other financing options.

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What do these stats mean for you?

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It’s safe to say that Mexico is on the right path to financially include more people into the formal financial system, especially as its government enables the operation of hundreds of fintechs. As long as fintech companies always provide access to financial products to the unbanked, Mexico will continue to become a fintech leader not just in Latin America but also in the rest of the world. 

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Credolab is another fintech that’s contributing to Mexico’s fintech ecosystem. Our embedded scoring technology can help lenders improve their credit risk management practices and assessment of borrowers’ profiles to widen access to credit and ultimately contribute to the proliferation of financially included individuals. With alternative data, credolab makes lending easier than ever for millions of Mexicans who remain unbanked.

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Learn more about the solutions credolab offers for improving credit risk management here: https://www.credolab.com/embedded-scoring-technology 

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