As Latin America’s fintech ecosystem continues to mature, here are some growing payments and eCommerce trends in Mexico to keep an eye out for in the near future.
Mexico – a frontrunner in eCommerce growth
Did you know that Mexico boasts the highest annual earnings from eCommerce across the region? According to the Ecommerce Foundation, Mexico counts a USD 21 billion annual spend, which represents a significant amount of the USD 71.2 billion annual total for the region. Brazil is not too far behind with USD 18.86 billion, while Argentina, Colombia and Chile have registered USD 6.83, USD 4.93 and USD 3.7 respectively.
Throughout the years, Mexico has been working hard to boost its economic growth and position itself as one of the 4 Latin American countries with the most significant ecommerce growth, alongside the ones mentioned above. As far as the future is concerned, smartphones and internet access are the determining factors that will encourage retail development, making Mexico the regional leader in mobile commerce (versus desktop devices). Mobile retail sales are forecast to jump by 34.8%, above the regional level of 27.5%, which surpasses Argentina and ranks second in eCommerce sales across the entire region.
Setting the standard for regulation
While Europe ramps up regulatory efforts to fight against online fraud and money laundering, Mexico sets the pace for fintech legislation, providing a framework for companies that offer alternative access to finance and electronic payments.
The Fintech Law encourages competition and favours structural changes in the financial market, in the following areas:
- Payments/ eMoney/ digital cash
- Open banking/ data sharing (business models, big data and analytics)
- Blockchain (digital assets)
- Marketplaces and digital platforms
More specifically, the objectives are:
- to define the characteristics of transactions carried out by the Electronic Payment Funds (electronic wallets);
- establish the information necessary to request authorization for companies to organize and operate as Fintechs;
- provide the terms in which the Fintechs must submit to the National Banking and Securities Commission their policies of KYC (know-your-customer), as well as the criteria, internal procedures and measures that must be adopted to comply with the provisions.
A market still fraught with fraud and distrust, in spite of growth potential
Mexico represents one of the largest consumer markets globally, however one full of contrasts: while the country`s economy has witnessed a positive trend, yet most of its population has failed to reap the benefits of this stabilization. There is poor financial inclusion, scary fraud level and low credit card penetration which forces traders to look for alternative payment systems.
Security remains one of the top reasons for customers not to make online purchases, while offering cash as a payment method will only encourage those without a card or a bank account. As Aite Group indicates, Mexico has the highest degree of consumer concern regarding data breaches. In addition, it also has the highest rate of concerns about identity theft (83%), fraud on credit cards (73%), online banking fraud (70%), fraud on debit cards (76%), direct debit fraud (68%), check fraud (60%) and mobile wallets, including PayPal, Apple Pay and Google Pay (48%). Needless to add, implementing anti-fraud strategies should be a high priority on the agenda.
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Financial innovation – where to?
The Mexican Fintech ecosystem includes no less than 334 Fintech startups, “which leaves the country behind Brazil, the largest Fintech ecosystem in Latin America with 377 startups”, as the latest Fintech Radar Brazil indicates. This means that the Mexican ecosystem is currently “2.5 times larger than Colombia, the third Fintech ecosystem in the region with 124 startups, over 3 times larger than Argentina, and over 4 times larger than Chile”, the same source indicates.
Presently, the 6 main segments across the country are:
- Payments and remittances, representing 23% of total (75 startups)
- Lending, with 22% of total number of startups (74, more specifically)
- Enterprise financial management, representing 13% of total (45 startups)
- Personal Financial Management, which accounts for 11% of total (36 startups)
- Crowdfunding, representing 9% of total (30 startups)
- Enterprise Technologies for Financial Institutions, representing 7% of total, with 23 startups (source: Finnovista)
For a country which counts such a strong Fintech startup force, the financial market can only channel its efforts towards consolidation and innovation, a process mainly characterized by the use of new technologies.
Against this background, does Mexico have what it takes in order to become a global Fintech hub? The potential is definitely there, however the industry needs to embrace it and further redefine the local financial sector’s advantages, while addressing the challenges. Time will tell.
Statistics at a glance
- Mexico is home to 37.9 million e-shoppers (which is almost twice the population of Australia)
- in the last 12 months, 7 out of 10 Mexicans purchased a product or service online
- the market’s largest segment is Electronics and Media
- by the year 2020, 55.3 million Mexicans are expected to shop online.
In case you’re attending the ECSE eCommerce Summit and Expo today, you still have the chance to meet with our G2A PAY team. We are exhibiting at the event, together with our PrestaShop partner (booth 227).