The fintech ecosystem has rapidly evolved to become one of the most critical and complex aspects of the financial services industry. But what are they and why are they important?
Financial technology companies are changing the way people think about banking and investing. Specifically, they are challenging the way we have historically assumed about financial systems and offering new ways for people to interact with money.
The fintech ecosystem democratizes the financial services sector by enabling more people to become banked. In turn, this democratization can help drive innovation and inclusion in the sector, which can positively impact economic growth.
In Mexico, the ecosystem is thriving. This development is due to a supportive regulatory environment and a culture that embraces innovation. Domestic and foreign capitalists have also invested heavily in the country’s financial technology sector, which has helped drive development.
This backdrop has been ideal for the formation of new, multi-product financial companies that innovate in service offerings. The new companies make available to many more Mexicans financial products that, until a few years ago, seemed to be exclusive to certain markets. For example, investments. Companies such as kubo.financiero have democratized this product, offering an intuitive platform where anyone can invest in fixed-term deposits starting at 100 pesos.
The number of fintech licenses in Mexico is among the highest in Latin America. According to Carlos Orta, lead partner of Regulatory Risk at Deloitte, our country “has stood out as an attractive territory for the development of companies that offer financial products and services through technological tools (fintech).
Two important reasons for this are that, in our country, cash is still the main mechanism for making transactions; and that there are low rates of financial inclusion, which means that there is a relevant area of opportunity for these new competitors”.
The Deloitte expert adds that these are not the only reasons. At a national level, there are more elements that have boosted this sector:
- The Law to Regulate Financial Technology Institutions, known as the Fintech Law.
- The support to users, in case of controversy, from the National Commission for the Protection and Defense of Financial Services Users (Condusef).
- More investments in fintech companies.
- High density of cell phone users; 88.2 million Mexicans use these devices and 90% of them have a smart device to carry out financial transactions.
According to the Fintech Radar and Incumbents 2021 report, these aspects have influenced financial technology institutions in our country to register a 16% growth during the last year, reaching the figure of 512 companies in operation.
But what has made fintechs in Mexico so attractive? The fintech report prepared by Miranda Global Research reveals that users identify that fintech products have lower costs in the management of accounts, credit cards, payments and investments. In addition, the study details that due to their digital, responsive and intuitive platforms for users, fintechs can serve unprofitable segments for other financial institutions.
What’s next for fintech?
The co-founder of Finnovista, Andrés Fontao, said in an interview for the newspaper El Economista, that today the region is living the fintech 2.0 stage, in which the ecosystem is seen more as a technological layer, where the opportunities are for startups that generate infrastructure leveraging on issues such as openfinance; but also fintech solutions within other technology platforms such as “buy now, pay later”.