Fintech companies will improve financial inclusion and reach out to those people who have been left out by the traditional banking system. Banks can then take advantage of this by offering their products to this larger banking population and compete with fintech companies for the clients they generated. This is great for inclusion and for the banking sector as a whole because competition raises quality and is always better. For traditional financial institutions, it may not be a great idea from a business point of view to take their distribution channels and offer products to people who are not in the financially included sphere; banks are businesses after all. However, fintech companies have agile systems that allow them to reach these unbanked people. However, traditional banks are not placing obstacles in the way of fintechs as strongly as many would think. I have not seen them opposing fintechs in a blatant way. Currently, many fintech business models are not directly acknowledged by the system.
Director General, FinTech Mexico
In terms of the current financial infrastructure in Mexico, it is not ready. We did not see the growth coming in terms of the things we needed in place to help the digital economy grow in scale as rapidly as we are experiencing now. One specific example is a technology that, unfortunately, is non-existent in the Mexican market: an address verification system. When making an online transaction with a debit or credit card, there is no way to confirm someone's zip code from their billing statement at the time of purchase. In addition, as we migrate to more online transactions, the fraud that was occurring with card transactions is moving online with the presence of chip and PIN cards. Fintechs today are not trying to grab market share from each other but rather enlarge the market. The only way to make the market bigger is by collaborating.
Co-Founder & CEO, Payit
Fintech in Mexico has an amazing opportunity to be frontrunners and the hub worldwide. Here, there is an absolute need for differentiated and different types of financial services. Around the world, the retail banks that are making the most money are in Mexico. That means, in Mexico, we are paying a lot of money for financial services, services that banks are not doing correctly. There is a huge opportunity to disrupt banks and provide a better service. If we take that together with the fact that only 40% of Mexicans are banked, imagine the amount of opportunity. Still with only 40% of the country, we are the ones creating the most money out of retail banking. The opportunity to make the country a better place to live, to make more money, and to make a better economy, comes a lot through fintech in Mexico. Our main goal for the next round of the Seedstars World Contest in Switzerland is to convey this necessity and opportunity.
We focus on getting access to information that is relevant to this business and interpreting it in such a way that we reach the final end goal that any traditional financial institution would look at. There is a great deal of data out there, and banks have an accounting team, a finance team, and tax team. When any bank analyzes information, they measure two things: payment capacity and willingness to play. The willingness factor is extremely relevant the smaller one is. The fundamentals do not change here; we are still analyzing two things. We gather the same amount of information that a typical brick-and-mortar lender would ask for. With that information we paint a more complete picture of what the payment capacity and the willingness to pay look like. Through such solutions that are more fueled by technology and digital services, we have greater accuracy in the risk part than a traditional lender. We have seen this with the numbers that we have.
In 2017, we broke records for remittances. We are still waiting on December's numbers; however, in 2016 we stood at USD26 billion and we are already at USD28 billion without closing 2017. The remittance corridor from the US to Mexico is the largest in the world and, thus, a massive part of the economy. One of the things that this enables is that one can send any amount of money across the world for a few cents. We looked at enabling remittances from the US to Mexico and realized it was extremely complex. We started to work on the first stage, which was creating infrastructure for Mexico to connect to the new digital economy. Instead of offering a B2C solution for remittances, we offer a B2B service for remittances. We work with regulated money transmitters that have the ability to move US dollars to Mexican pesos. They move money via cryptocurrencies, which is currently the most efficient way to do so.