Isabel Woodford

MEXICO CITY, (Reuters) – Mexico’s financial inclusion has declined since 2018, according to official statistics. This is despite a surge in financial startups that aims to ‘bank unbanked’.

According to this month’s National Inclusion Report, 67.8% of Mexicans had at least 1 financial product last year. That is 0.5% less than in 2018. Cash still accounts for 90% of all transactions below 500 Mexican pesos ($25), and 78.7% in payments or bills above 500 pesos.

Latin America’s second largest country is now far less inclusive and dependent on cash than similar economies such as India, Kenya, Brazil and Brazil.

It is despite many ‘pro-inclusion” fintechs having arrived in Mexico over the past few years, offering easy ways of signing up and no-fee bank accounts, like Klar, Keusiki Pay or Stori. db3c7326-bd1c-4f93-ac74-00535fb266ff1

Latam: Bank and fintech penetration: https://graphics.reuters.com/FINTECH-INCLUSION/byvrjdxmkve/chart.png

These startups have millions of users but are not moving the needle in Mexico’s informal economic sector, according to Maelis Cararo, managing director, consulting firm BFA Global.

According to Reuters, “Fintech innovations have yet not delivered on their potential for building solutions that center on underserved populations.” She said that she believes fintechs are primarily targeting Latin America’s urban elite and not the rural poor where banks infrastructure is needed most.

Fintechs, for their part say that they require more regulatory support in order to make an impact.

“Until there are more digital players [licensed as]”Banks, inclusion will still hit a ceiling,” stated Juan Guerra (Revolut’s Mexico chief Executive).

He said that Fintech users must still link their digital accounts with licensed banks. This requires a visit at traditional brick-and mortar branches.

According to the Mexican Fintech Association (Mexico Fintech Association), 58 companies were approved or provisionally authorized for payment licenses since the 2018 introduction of the government’s ‘fintech legislation’. However, no retail banking licenses are being issued.

The proportion of Mexican adult bank account holders increased by two percentage points to 49.1% between 2018-2021, and card use for large transactions rose to 12.3%.

Mexico continues to be a magnet for international startup companies like Nubank and Uala, as well as ambitious plans for full-scale banking.

A banking app has been launched by Oxxo, a convenience-store chain. The company claims that it boasts over 1.6million users. Oxxo locations are much more populous than branch banks, so customers can register directly there.

After the gap in financial inclusion between men and women doubled by 2021, Mexico has undertaken an independent pilot program to help women get banked.

Officials also encourage the use of CoDi (government mobile payments system) to get welfare benefits.

($1 = 19.8372 Mexican pesos