What best meets your needs to acquire a loan or make an investment, a fintech or a traditional bank? Who will be the fintech protagonists this year in Mexico? Which ones have been approved by the CNBV? This article will answer these questions, as fintech startups are coming strong in 2022.
Unstoppable Growth for Fintech in Latam
2021 was a prolific year for Latin American startups, as they shone with innovative proposals and amassed considerable investments. 2022 also looks like a pivotal year for the growth of fintech companies in the region, especially those in Mexico.
The international context in which we find ourselves has made people look for alternatives to traditional banking institutions on the Internet and new technologies. For this reason, Mexican fintech companies are a boom in the Latin American startup ecosystem. Last year they opted for innovative services and proposals, and in 2022 they are heading to dominate the market.
Traditional banking has begun to see fintech as a valuable service alternative. For example, HSBC plans to buy, invest in, or partner with fintech companies in 2022 due to the unique qualities of these startups in contrast to traditional banking.
CNBV and «Fintech Law»
In the particular case of Mexico, the National Banking and Securities Commission (CNBV) continued in 2021 with its authorization process for fintech, which derives from the Fintech Law that came into force in 2018.
The law seeks that the CNBV authorizes these organizations to offer legal guarantees to users. They monitor financial activities and cash flow on their platforms and services to ensure that they do not have illicit origins or are used for money laundering.
Fintechs approved by the CNBV
In 2021, the CNBV endorsed 24 fintech, and at least 30 more may join the list soon, so 2022 looks very busy for fintech companies in Mexico. There are two types of fintech companies according to their services.
Collective Funding Institutions
The Collective Funding Institutions (IFC) are focused on private investment to finance loans. A trend that stands out in this type of fintech is crowdlending. It works with financing platforms in which users request a loan, and a group of people offers to finance said debt with the commitment to pay on time and under specific terms.
They are an excellent option for loans since their interests are lower than traditional banking by eliminating unnecessary commissions. In addition, its cooperative nature is beautiful as a social manifestation of solidarity and support between people.
The collective funding fintech companies approved by the CNBV are the following:
- Fundary, CDMX; has 3.2 million dollars of investment from its founder and CEO, Marcelo de Fuentes.
- Likidéo MX
- BXL Fintech
- Doopla, CDMX, with a private investment of 480 thousand dollars.
- Prestadero, CDMX, with a private investment of 909 thousand dollars.
- M2Crowd, CDMX, specializes in real state investments.
- 100 Ladrillos, Guadalajara; focuses on real state investment, and with three investment rounds, it has obtained 2.5 million dollars.
- Play Business
- Crowd Up Mex
- Fintech on Demand
- Top Kapital
These last two joined the list recently in April 2022.
Electronic Payment Fund Institutions
Electronic Payment Fund Institutions (IFPE) function as electronic wallets or purses. National and international transfers can be made, managed, and paid. Many are not yet functional, although they have requested their approval before starting their services.
These fintech startups are optimal ways to send and receive remittances from abroad. Other platforms such as PayPal or Mercado Pago have taken advantage of this. The digitalization of banking and the opportunities that the home office offers to carry out work from abroad have made these fintech services one of the ideal means to make international transfers.
- NVIO Pagos
- Trafalgar Digital, CDMX.
- BRX Payments
- Inguz Digital
- Tu Dinero Digital
- Sistema de Transferencias y Pagos STP, CDMX.
- Cuenca, CDMX.
- Mexpago, Estado de México.
- SDMX Superdigital
- Todito Pago
The latter recently joined the list in April 2022.
Another 27 Fintech Waiting to be Approved
Additionally, there are 27 fintech instances awaiting approval. The process is digital, so the panorama is favorable for fintech startups.
One requirement is having a minimum capital of 500,000 Investment Units (equivalent to 3.5 million pesos) and having a business plan and financial viability for the first three years of operation.
The most Consolidated Fintech Companies in Mexico
Let’s consider the Mexican fintech startups that achieved unicorn status in 2021 and the most important in Latin America during the same year. We can get an idea of which are the Mexican startups of the moment.
1. GBM +
Developed by the Mexican Stock Market Group and regulated by the CNVB, GBM+ grew in popularity in 2021. Aware of this, it enabled its Academy section, where it makes ebooks, webinars, courses, and more about online investment available to the public so that its users get the most out of their assets.
A digital benchmark for cryptocurrencies in Mexico, Bitso has established itself as one of the most popular options for transactions with Bitcoin, Ethereum, XRP, Chainlink, etc. If you want to invest in crypto this 2022, consider the ten cryptocurrencies with a promising future in 2022 and choose the one that best suits you.
One of the highest-rated Latin American unicorns of 2021 is Clip. It specializes in financing for SMEs and is offered as a solution so that they can make card payments without paying high rates and commissions.
It is another of the Latin American unicorns of 2021, valued at 1.3 million dollars. Konfío makes a platform of business finance solutions available to its clients for immediate liquidity and electronic invoicing, and business management through its administrative software.
Difference between Fintech and Traditional Banks
One of the general beliefs about the fintech-bank relationship is that the former focus on a sector of the population that traditional banks, institutions with a history of more than 100 years in Mexico, rarely reach, that is, the low-income people.
According to the latest National Survey of Financial Inclusion of the Ministry of Finance and Public Credit in Mexico, only 15% of the Mexican population has a bank credit card.
The percentage is deficient if one considers that, on the other hand, 54 million Mexicans, that is, almost 43% of the population, have some other banking product such as a debit card or payroll account.
Credit Cards in Mexico
A deep-rooted belief among many Mexicans is that credit cards generate endless debts due to their mismanagement. Added to this are the problems of fraud and cloning that some people occasionally suffer.
The costs for maintaining the line of credit (for opening, annuity payment, or high interest) are also overwhelming as the requirements and obstacles that banks impose. In short, in the eyes of many Mexicans, credit cards are not attractive.
The Alternative Offered by Fintech
Fintechs have responded to most of these problems by freeing their services from charges for opening or annuity and maintaining lower interest rates than traditional banks.
They have understood that much of the repudiation of credit cards derives from dealings with banking institutions. For this reason, one of its focuses is improving the user experience with platforms where requests are online, fast, easy, and without restrictions. It allows the majority to have a tailored service according to their possibilities.
However, the CNBV has not authorized all of them, so there are risks in case of fraud. Some are platforms with more excellent opacity than traditional banking, heavily regulated by Mexican law.
The National Commission for the Protection and Defense of Financial Services Users (CONDUSEF) has put a section specially designed to file complaints against fintech. Along with the Fintech Law, this scenario creates a protection fabric for the user.
The Strongest Fintech Startups for 2022 in Mexico
Considering the growth trends of the last year and the economic forecasts for 2022 for Mexico, these are our fintech startups for 2022.
Based in Mexico City, Klar is a digital financial services platform for users that, in five investment rounds, has obtained 77.5 million dollars in investment.
One of the most robust bets for SMEs in Mexico is Yaydoo. It offers automated management of payment processes of companies, as well as an automatic assortment of all the supplies necessary for work.
One of the most popular bets in recent years in terms of digital credit is Fondeadora. It currently has more than 100 thousand users and an investment of 32.2 million dollars. It describes itself as «the best credit card» and promotes itself as a superior alternative to traditional banking.
Based in Guadalajara, Jalisco, Kueski seems one of the fintech startups with the highest growth this year. With $300 million raised, in December 2021, it announced its fifth Series C round of $102 million. Its service is committed to small but fast loans and practically instantly, without the need for cumbersome paperwork or considerable waiting time.
An alternative to bank credit cards, Stori bets on a primary line of credit without commission for contracting or a more robust option in terms of credit margin but with a commission.
The Flink investment platform allows you to participate by acquiring fractions of shares of the New York Stock Exchange from 30 Mexican pesos, all without commission.
The Fintech Landscape for 2022
Deciding between a bank or a fintech is a personal decision. Still, above all, you must make an informed decision and fully understand the requirements of the institution you are approaching.
The pandemic could extend throughout 2022 and generate an environment conducive to digital alternatives and the recent movements within the national banking system. The sale of Citibanamex shook the banking scenario in Mexico and raised uncertainty.
Latin American fintech startups continue to grow, so their outlook is promising. With more legal guarantees, it will be possible to generate trust among users. In addition, traditional banks’ interest in jointly participating or acquiring some fintech startups for their online services reinforces this confidence. Let’s hope for new and better proposals in Mexico for 2022.
Translated from Spanish on May 27, 2022.
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