How digital payments can gain traction in Mexico

0

Digitizing Payments in Latin America February 2022 - Find out why payment providers can help Mexican merchants meet their consumers' growing appetite for digital payments

Improving financial services is a priority for many families and individuals in Latin America, and online banking forms the core of many financial institutions’ (FIs’) strategies for providing these services. A recent survey found that around 90% of bank customers in the region are leveraging some form of digital banking, with Brazil taking the top spot at 98% and Mexico following closely at 94%.

Mexico presents a particularly interesting case regarding the evolution of digital payments in Latin America. Most Mexican bank customers said they would be willing to migrate to fully digital banks in the next few years, indicating that online digital banking services at established financial institutions could be a stepping stone to transactions and fully Internet-based loans.

Despite these promising results, however, digital payment penetration still has a long way to go in Mexico, largely due to the country’s still largely unbanked population. The following in-depth analysis explores the factors driving Mexican consumers to adopt digital banking and payments, the barriers that are holding many back, and how current initiatives could improve digital payments penetration.

Preferred digital payment methods of Mexican consumers

Digital payments are growing rapidly in Mexico, with a total digital transaction value of $54 billion in 2021 expected to reach $90.1 billion by 2025. Mexican consumers’ preferred digital payment method is wallets digital, which accounts for 19% of all payments, but these are far behind credit and debit cards, which account for 47% of all transactions.

Nevertheless, cash remains the most popular means of payment in Mexico. The vast majority of bank customers use digital access methods, but only 37% of Mexicans have bank accounts, according to to a recent study. Those with bank accounts tend to have several traditional payment options associated with them. There are currently 0.99 debit cards in circulation per capita, for example, indicating that the average bank customer has multiple debit cards. Credit cards are much less popular, with only 0.19 in circulation per capita.

The pandemic is also changing the payments landscape in Mexico. A study found that 93% of Mexicans regularly used cash before March 2020, but 86% said they used this method of payment less as the pandemic continued throughout this year. Card usage also fell from 28% to 26% for debit and from 14% to 11% for credit.

Digital payments could fill this gap, but the lack of Mexican consumer bank accounts makes this a daunting challenge. Thus, FIs and payment players are taking several steps to overcome this drawback.

Initiatives to improve access to banking services and digital payments

Many initiatives are underway to improve Mexicans’ access to digital payments, but one in particular stands out. Banco de México recently launched its national digital payments platform CoDi to boost the use of digital payments in the country and reduce consumer reliance on cash, debit cards and other payment methods that can easily be stolen or otherwise compromised.

CoDi leverages QR codes and near-field communication to allow consumers to use their smartphones for digital payments, with money transferred through Mexico’s real-time gross payments system, SPEI.

However, CoDi has been slow to gain traction with just 38 banks and 5 million users by leveraging the country’s nearly 130 million population. Miguel Diaz, general manager of payment systems and market infrastructure at Banco de México, told PYMNTS in a recent interview that much of this slowness was initially due to the platform’s poor user interface, which required merchants to send 18-digit account numbers to each new customer. when boarding.

Banco de México is currently exploring options to improve this user experience and grow its user base, but it cannot solve the problems facing digital payments on its own. Businesses and banks will need to join forces to improve access to bank accounts and expand the adoption of digital payments across the country.

Share.

Comments are closed.