July 19, 2021Mexico
Mexico Fintech ecosystem
With a GDP of 1,076 USD billion, Mexico is the second biggest economy in Latin America and one of the biggest in the world (World Bank, 2021). All this even after a collapse of 8.5% of its GDP in 2020 caused by the Covid-19 Pandemic (El País, 2021). Also, in 2021, the recovery of the economy is expected with a growth of 5.5 percent. Nevertheless it is also expected that in the case of Inflation 2021, it will go to 5 percent at an annual rate for this year (El financiero, 2021)
In Mexico, SMEs generate 72% of total jobs and 52% of total production. However, the impact of the pandemic was negative, which caused 20.8% of SMEs to close their business (Notipress, 2021). Another important point is that even though Mexico is one of the biggest economies in LATAM, there are large gaps between the rich and poor.
Fintech in Mexico
Fintech progress in Mexico has been considerable in recent years. This has led it to position itself as the second country with the highest number of Fintech only behind Brazil.
As of 2020, there were almost 441 Fintech in México (Finnovista, 2020). Moreover, México became the second country with the highest capita obtained in 2020, also only behind Brazil (El economista, 2021)
Fintech impact in employment is also a big factor since Fintech companies are employing an average of 35 people and in total, it is estimated that Fintech generates about 60,000 jobs in Mexico (Finnovista, 2021)
Lending Fintech in Mexico
Lending is one the main Fintech sectors in Mexico, along with the payment sector, covering almost half of the total participation. Enterprise Technologies for Financial Institutions (ETFI) and Insurance segments are also positioning themselves in a good place with a significant increase in new businesses.
The high number of lending Fintech provide numerous options for SMEs, however, it is expected that lending companies will need to innovative (add new services and functions for clients) more than in other countries due to the high number of companies.
Among the most important Lending Fintech companies are Credijusto, to which Goldman Sachs and Point72 invested about 42 million dollars in this Fintech that, adding to previous funding, reaches 250 million dollars raised since the beginning of its operations in 2015 (Panamericanworld, 2021). Meanwhile, Konfio is another top fintech company which managed to close a new round of investment in series E for a total of 125 million dollars in june 2021.
In terms of regulation, Mexico is one of the few countries to have a Fintech law in Latin America that establishes regulations to enter, operate and be supervised. Crowdfunding institutions and electronic money and payment institutions are required to file for an authorization before the CNBV to provide their services in Mexico.
Definitely, Mexico is becoming one of the fintech powers in the world and has the ability to help close the financing gap. Likewise, a challenge is expected for lending fintech companies, as over time fintech companies must differentiate themselves and expand their reach in order to survive.
