Mexico is in the early stages of a financial technology revolution, with space for Irish fintech firms to grow
With an underbanked population and skyrocketing use of mobile tech, Mexico offers an open door to growth for Irish financial technology firms seeking new opportunities in the global market.
This is a market with a real need for innovative financial services. In fact, Mexico is in the early stages of a financial technology revolution, with start-ups focusing on flexible, low-cost, accessible services.
It is the Latin American hub for the fintech sector and start-ups are flourishing in the wake of local peer-to-peer payments pioneers such as Kubo, Financiero and Conekta.
Partly driven by the same social distancing regulations and the decrease in the use of cash seen everywhere because of the pandemic, use of mobile banking is soaring in Mexico, up 113pc between 2018 and 2020.
Across the board, the financial services market in the country remains underserved – but local consumers and businesses are keen to see new services in this area, and new financial companies don’t have to compete with legacy institutions as much as they might have to elsewhere.
With only 47pc of the population having a bank account, it’s no surprise that lending and payments are the top two areas in which fintech start-ups are operating. There continues to be huge demand and extensive room for growth in this area.
Start-ups are also active in Mexico in blockchain, crowdfunding, cryptocurrencies, digital banking, enterprise financial management, personal financial management, remittances and foreign exchange, scoring, identity and fraud, and in wealth management.
In the Austin, Texas office of Enterprise Ireland, we not only support Irish businesses seeking to do business in nine southern states of the US, but also those who want to break into Mexico. We help them evaluate the local opportunity and also offer in-market support, such as introductions to buyers, partners and decision-makers.
Fintech businesses in Ireland considering this step will be in good company, with several Irish tech firms already thriving in Mexico, including Workhuman, AdaptiveMobile and Daon.
Other Irish businesses also active in Mexico include Ornua (Kerrygold’s parent company), mobile recharge provider Ding, forklift firm Combilift, food packaging manufacturer Fispak, GM Steel Fabricators, and pharmaceutical engineering firm Prodieco. Overall in 2019, Irish exports to Mexico were worth €83m, up 36pc on the previous year.
Rapidly developing markets like this one undoubtedly present challenges to potential new entrants.
With a troubled history of corruption in the past, some lingering distrust of financial institutions remains – but the introduction of a stringent fintech law in 2018 has helped considerably. Companies considering the market must ensure they are compliant with these laws and can operate legally in Mexico.
Geography can also be a challenge, with many rural areas having no banks or ATMs – meaning people are less likely to have bank accounts.
While this represents an obvious opportunity for digital payments firms, internet connectivity and mobile services can be poor in some locations. As a result, fintech firms are clustered in urban areas, with more than half of the 700 or so start-ups in the sector based out of Mexico City.
Other factors which inhibit greater financial inclusion in Mexico include income, education, and even gender. That gender gap should close quickly, however, as men and women are equally likely to use mobile tech and social media.
When it comes to exporting, understanding the nuance of any new market is vital. Trust is crucial in Mexico, and on-the-ground agents or partners are needed to navigate the local business environment and build customer relationships.
Firms must also remember to localise products and messaging properly, as Mexican Spanish is different to that spoken in Spain.
For Irish fintech firms seeking to expand overseas, Mexico undoubtedly presents a real opportunity to build a user base quickly in a rapidly developing and dynamic market.
Sara Hill is SVP Southern US & Mexico at Enterprise Ireland. Get extensive advice and insight into local market conditions and practices in Enterprise Ireland’s ‘Exporting to Mexico’ guide for Irish businesses, which you can download from www.globalambition.ie