According to the last Fintech Radar Brazil, Mexican fintech startups number 334, coming second to the largest fintech ecosystem in the region – Brazil which numbers 377 startups. Mexico’s fintechs are driven mainly by the growth in the following segments: Enterprise Technologies for Financial Institutions, Trading, Capital Markets, Wealth Management and Alternative Scoring, Identity and Fraud.
In this position as the second largest fintech ecosystem in Latin America, Mexico is one of the main drivers of financial innovation. Mexico’s ecosystem is less than 4% smaller than that of Brazil, towering over the fintech ecosystem of other countries in the region. According to Finnovista, Mexico’s fintech ecosystem is currently 2.5 times larger than Colombia, the third largest fintech ecosystem in the region with 124 startups, over 3 times larger than Argentina, and over 4 times larger than Chile.
In the past months, Mexico has taken major steps to drive the fintech ecosystem and position itself as one of the potential global fintech hubs. One of the key areas has been in the regulation of the country’s fintech industry through the groundbreaking Fintech Law passed by Mexico’s lower house of Congress on 10 March 2018. According to Reuters, the approved bill includes fintech aspects such as crowdfunding and cryptocurrency firms – placing Mexico amongst a small group of countries to establish regulations for the industry.
Since July 2017, 125 new fintechs have been added to Mexico’s startup scene, contributing to the transformation and innovation associated with the introduction of disruptive technologies, transforming the traditional banking model of the finance sector.
Mexico has a buoyant fintech sector with a high success rate of startups in comparison to other fintech markets in the region. This is illustrated by the attrition rate of startups in Mexico over a 12-month period from July 2017 – June 2018, where only 29 startups have ceased operation during this time – a mortality rate of 12%, compared to Brazil’s 145 startups which have ceased operation during this time.
In addition to this, Finnovista notes that Mexico showed an annual fintech startup growth rate of 40%, compared to Brazil, Columbia, Argentina and Chile whose growth rate was 48%, 52%, 56% and 22%, respectively. Finnovista explains that Mexico’s lower growth rate, together with its lower mortality rate could be indicative of “consolidation in the country’s fintech sector, with a higher number of startups in more advanced stages of development that are consolidating their business models.”
Analysis of 110 Mexican fintech startups by Finnovista shows that 64% of the new fintech firms have received funding from third-party players with 40% having received less than one hundred thousand dollars and only 7% indicating that they have raised over one million dollars.
However, despite these figures the last years have seen important investment rounds in Mexican fintech startups such as 89 million dollar round raised by the lending platform Konfio; 7 million dollars raised by Curu, and 6 million dollar round raised by ePesos.
Finnovista also notes the significance in the role of Venture Capital firms in the Mexican fintech ecosystem, with 18% of Mexican startups claiming to have raised funding from local funds and 12% from international funds.
Fintech increasingly gains significance in the financial sector, offering services and solutions in a region where 51% of the population remains unbanked, with fintech companies positioning themselves to facilitate financial services to this segment of the population, providing them with a solution from platforms for remittances and digital payments through the use of smartphones.
