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By Suresh Vaghjiani, Global Processing Services
It was a very interesting experience to visit Mexico City on behalf of the Department for International Trade in partnership with the The Payments Association.
It’s not every day that UK FinTech companies get a chance to meet with key Mexican stakeholders and decision makers in the industry. I was proud to lead the delegation of 6 UK PayTech companies to showcase their expertise at the PayExpo Americas 2017 Summit in Mexico City.
Armed with all the knowledge I needed about the Mexican market, which was provided to me by our highly experienced Mexican lead for Project International Trade Norah Prida Bay, I was confident that that the trip would be fruitful.
Financial Services are one of the most dynamic sectors in the Mexican economy, with an estimated 22 UK-based companies in the country. These companies range from the largest UK investors in Mexico, such as HSBC – 5th largest bank in the country – to smaller consulting firms providing niche services in the financial services sector.
Mexico’s SMEs make up nearly 95% of all companies in the country, generate 52% of the national GDP and employ 72% of its population. According to the World Bank, the lack of capital available to SMEs affects economic growth by maintaining low levels of productivity.
Amongst the pillars of Mexico’s new Financial Inclusion Strategy is the promotion of the use of digital technologies to allow broader access to financial services and the substitution of cash for electronic payments.
In Mexico, the lack of flexibility from commercial banks, to provide instruments for SMEs and entrepreneurs, gives FinTech companies commercial opportunities on retail banking and payments.
According to US think-tank Finnovista, there are 140 FinTech start-ups in Mexico, primarily focused on e-payments, loans, financial education and personal finance.
FinTech regulation is currently being drafted by Mexico’s Ministry of Finance (SHCP), in collaboration with the National Banking and Securities Commission (CNBV) and the central bank (Banxico). This new FinTech Bill in Mexico, which has been passed back and forth for many months, has now had a sudden urgency to be finalised based on presidential developments in neighbouring USA.
This was the first conference I had ever attended where every seat for every session was taken, even the grave yard sessions! The interest and attitude to learn and understand was over whelming. Even the private meeting that I had with the Mexican Finance minister and his team, thanks to the DIT, was open and frank. It was apparent that they are eager to learn from the best practises of the Financial Conduct Authority.
My personal thoughts are that the Mexican market has everything – the market size, the interest and the right attitude – however there is only one thing missing and that is the very fundamentals of what Fintech stands for.
Fintechs have grown by solving the problems that the incumbent providers have not been able to solve; this has been the back bone to the sector with innovation stemming from problem solving.
What I saw in Mexico was a real desire to be part of the Fintech movement with both entrepreneurs and banks wanting to have a piece of the Fintech cake. It is my belief that they should not merely want to join the Fintech movement rather they should be considering what problems they face that Fintech can solve. For example, of the 5 largest banks I spoke to, at the newly formed Fintech Hub, only one of them asked me about how Fintech could solve the issues of migrant Mexicans in the US trying to send money back home to Mexico.
I do believe that Mexico will thrive based on the attitudes of the people and their willingness to learn however, they must re-evaluate their approach focusing not the fame of Fintech, but rather the notion of using Fintech to solve problems.