The world of finance is undergoing a profound transformation, and Mexico is no exception. In recent years, the country has witnessed a burgeoning fintech industry, particularly in the business-to-business (B2B) sector: Mexico’s fintech market now encompasses over 650 companies and counting. This evolution has been accelerated by regulatory changes that are fostering innovation and competition within the financial technology landscape.
Mexico’s fintech ecosystem has experienced remarkable growth, becoming one of the most dynamic in Latin America. A diverse range of startups and companies are offering innovative financial solutions to consumers and businesses. But while B2C (business-to-consumer) fintechs have garnered significant attention globally, the B2B sector is quietly reshaping the financial landscape for enterprises in Mexico today.
Recognizing the potential of fintech to improve financial services and drive economic growth, the Mexican government has introduced significant regulatory changes in conjunction with the Bank of Mexico (Banxico). The most prominent of these changes was the Fintech Law of 2018. This groundbreaking piece of legislation marked Mexico as the first in Latin America to establish a regulatory framework tailored explicitly for fintech companies and opened the door for new players to enter the market.
Key regulatory changes included the creation of an open banking system, electronic payment funds, regulatory sandboxes, and digital identity verification.
The introduction of open banking creates new avenues for innovation in Mexico by reshaping how businesses operate and collaborate with one another. With open banking, businesses in Mexico will be able to access a plethora of financial tools and services that were once reserved for larger enterprises. Companies including Jeeves have started testing Mexico’s open banking for its clients in hopes of streamlining the payment and underwriting processes for financial products. Though open banking in Mexico has yet to be widely adopted, we’re hopeful that in the near future it will foster innovation, efficiency, and cost-effectiveness for businesses of all sizes.
Embedded finance represents a paradigm shift in how businesses access financial services. Instead of seeking out financial solutions separately, companies can now seamlessly integrate these services into their existing operations. DiDi Loans, for instance, has integrated lending services into ride-sharing, extending over 5 million loans in just two years. The immense potential of embedded finance is becoming increasingly evident. By tapping into this sector, B2B fintech companies can cater to Mexico’s 4.1 million small and medium enterprises, streamlining their financial processes and enhancing operational efficiencies.
Instant payments are a game-changer for B2B transactions in Mexico. Traditional payment methods often involve delays due to batch processing and banking hours. Instant payment systems like CoDi and Dinero Movil, also known as DiMo, eliminate these hurdles, enabling businesses to transact in real time. This is especially critical for industries where time-sensitive transactions are the norm, such as supply chain management and manufacturing. Through payment methods such as DiMo, companies can send payments with nothing more than a phone number, greatly streamlining the B2B payment process which traditionally requires Clabes (bank numbers).
In the words of Arturo Herrera Gutiérrez, Mexico’s former Finance Minister: “Fintech is not only about financial inclusion; it’s about creating a new financial ecosystem that can propel Mexico’s economic future.”
With a favorable regulatory environment, a growing demand for innovative financial solutions, and a dynamic startup ecosystem, the stage is set for continued disruption. Under the promise to usher in a transformative era for business financial ecosystems and make significant contributions to the nation’s economic trajectory, B2B fintech is set to play a pivotal role in shaping the future of finance in Mexico.
See a16z.com/global-payments for more.