Why Mexico’s fintech sector is booming

12 Dec 2019

Fintech Last year, regulators in Mexico began to turn their attention towards issues surrounding financial inclusion, with new legislations for the financial technology (fintech) space being introduced. 

The ‘fintech law’ provided an outline for regulating digital financial products, including crowdfunding and electronic payment software, as well as offering an official process for running a fintech company. The aim of the new fintech law was to attract more people into the formal industry. Furthermore, it would help lower the amount of cash being used, which as a result would reduce money laundering and corruption.

Mexico’s economy remains widely dependent on cash. Roughly 44% of the adult population does not own any financial products. The majority of the population being unbanked, paired with the new fintech legislature has invited more room for Mexico’s fintech sector to flourish. 

Following the establishment of the law in 2018, around 100 new fintech firms were founded just in the same year, accounting for 52% of growth in the sector. Mexico is now a regional leader with over 273 fintech businesses operating in the country. Together with Brazil’s 380 fintech ventures, the two countries comprise 56% of the region’s total fintech presence. 

Over the past 12 months, numerous fintech companies have drawn in fintech investment. In May 2019, Japan’s Softbank Group funded roughly $20 million towards Mexican payments start up Clip, highlighting one of the first agreements in its $5 billion Latin American technology fund. Softbank is also conducting advanced discussions with Mexico-based Konfio, a start-up which helps small businesses secure loans. In September 2019, Goldman Sachs invested $100 million in fresh credit in Konfio, allowing the firm to offer up to $250 million in loans to 25,000 businesses over the coming year. 

Goldman Sachs, together with Point72 Ventures also co-funded Mexican fintech start-up Credijusto, just one month prior. This provided the start-up $42 million to help underserved SMEs secure credit. Also in September, Klar – known as the ‘Chime of Mexico’ – obtained $57.5 million in debt and equity seed funding. This was the largest amount ever collected in a seed round in Mexico. 

It is clear that the 2018 fintech law was successful in drawing investment and attracting interest in the sector over the past year. Heading into 2020, it is likely that this growth will continue to accelerate, making Mexico an u0p and coming hub for fintech activity and investment.