Over the past decade, Mexico has experienced a profound transformation in its financial landscape, largely driven by the digitalization of financial services. This financial revolution has changed the way people access credit and make payments, and has created an environment where opportunities and challenges coexist for businesses, consumers, and regulators. In this context, banking and the reduction of cash use have emerged as the main challenges, but also as key areas for the country's economic and technological development.

The Rise of Financial Digitalization

Digitalization has allowed a larger part of the Mexican population to have access to financial services that were previously out of reach. The proliferation of smartphones and improved connectivity have been important catalysts, as today millions of Mexicans can access digital platforms from the comfort of their homes. Mobile apps, fintechs, neobanks and cryptocurrencies are just some of the components that are redrawing Mexico's financial map.

This change has not only facilitated access to credit, but has also transformed the way payments are made, both online and in physical commerce. Digital payment has acquired unprecedented relevance, and with it, the need for companies to adapt their business models to accept electronic transactions safely and efficiently.

Fintech: The Engine of the Financial Revolution

Fintech companies have been the main drivers of this transformation. Innovative companies, with fast and efficient solutions, have burst into the market offering products that were previously only available to traditional banking clients. Services such as granting microcredits, international money transfers, and digital payment systems have democratized access to financial services.

In 2022, the fintech sector in Mexico was made up of more than 512 companies, and it continues to grow. These companies have reduced the barriers to accessing financial products and have facilitated the inclusion of individuals and small businesses in the formal financial system.

Banking: A Persistent Challenge

Despite technological advances, banking remains one of the most important challenges in Mexico. It is estimated that around 42% of adults do not have access to formal banking services, meaning that almost half of the Mexican population still relies on the use of cash for their daily transactions. This represents a significant challenge for the country's development, as the use of cash hinders the formalization of the economy, limits access to credit, and makes transactions less secure and efficient.

Low banking penetration is linked to several factors, including distrust in the banking system, high costs associated with opening and maintaining bank accounts, and a lack of financial infrastructure in rural areas. However, with the advancement of fintech and digital payment solutions, there is a clear path for Mexico to achieve greater financial inclusion in the coming years.

Opportunities for Digital Banking

The digitalization of the financial system represents a huge opportunity to overcome this obstacle. Through digital solutions such as electronic wallets and online bank accounts, millions of people can access the benefits of banking without the need to go to a physical bank branch.

Companies such as Mercado Pago, Clip, and Rappi have allowed small merchants and informal vendors to accept digital payments, which not only offers them greater access to financial services, but also allows them to attract a wider audience and improve their sales levels.

Cash: A Tradition Difficult to Break

Another great challenge for the digitalization of the Mexican economy is the deep dependence on cash. According to a study by the Bank of Mexico, 90% of transactions in the country are made with cash, which places Mexico in one of the first places in terms of cash use in Latin America.

The use of cash has implications that go beyond simple consumer preference. This habit is closely linked to the informal economy, which represents more than 22% of Mexico's Gross Domestic Product (GDP), according to INEGI data. Informality limits people's ability to access credit and financial services, perpetuating a cycle of financial exclusion.

Transition to a Cashless Society

The transition to a digital economy, with less use of cash, is a cultural and structural challenge, but important steps are being taken to achieve it. The expansion of electronic payments, the proliferation of fintechs and the increase in the adoption of QR code and NFC (Near Field Communication) payments are clear indicators that Mexico is moving towards greater digitalization in payments.

The Mexican government has also launched initiatives to reduce the use of cash, such as the CoDi (Cobro Digital) platform, which allows consumers to make payments for goods and services using QR codes, thus promoting a more formal and secure economy.

Regulatory and Security Challenges

With the rapid digitalization of financial services, new regulatory and security challenges also arise. As fintechs and digital payments expand, it is crucial that there are strong regulatory frameworks that protect consumers and ensure the stability of the financial system. The fintech ecosystem is regulated in Mexico under the Fintech Law, enacted in 2018, which establishes the bases for the operation of these companies and protects the interests of users.

On the other hand, cybersecurity is a critical issue as the use of digital platforms to make payments and access credit grows. Companies must invest in the security of their systems to avoid fraud and ensure user trust in digital platforms.

Opportunities for Companies in Mexico

Despite the aforementioned challenges, the digital financial revolution in Mexico also represents a huge opportunity for companies. Adapting to the digitalization of payments and credit is not only a matter of keeping up with technological trends, but also taking advantage of a growing market.

Companies that adopt digital payment methods and financing solutions through fintechs will be able to increase their competitiveness and expand their customer base. In addition, by participating in the formalization of the economy by reducing the use of cash, companies can access tax incentives and regulatory benefits that favor those who operate within the formal economy.

Financial Inclusion as a Driver of Growth

Access to digital financial services has the potential to empower millions of Mexicans, allowing them to access credit, insurance, and other financial tools that improve their quality of life. In turn, companies that support this financial inclusion will see their opportunities for growth and expansion increase.

SMEs, in particular, benefit greatly from this financial revolution. With the support of fintechs, these small and medium-sized businesses can gain access to lines of credit and payment services at a fraction of the cost and time it would take with traditional banking.

Mexico is in the midst of a profound financial transformation, driven by digitalization. While banking and cash usage remain major challenges, the opportunities to improve access to financial services and reduce economic informality are enormous. Fintechs, digital payments, and government initiatives are paving the way to a more inclusive and formalized future for the Mexican economy.

Companies that recognize and adapt to this digital revolution will be in a prime position to capitalize on new growth opportunities and contribute to Mexico's economic development. Without a doubt, the digitalization of financial services is the engine of a revolution that is just beginning.