Mexico needs a regulatory framework to promote innovation and financial access

Mexico City, November 26, 2024 – While Mexico has made strides in the digitalization of financial services, access remains a significant challenge. Currently, 90% of transactions in the country are paid in cash, 50% of adults lack a formal savings account, and only 11% have access to a credit card. These barriers disproportionately impact women and rural communities, underscoring the urgent need for a regulatory environment that encourages innovation and competition while ensuring user protection and system stability.

In response, the civil association SXXII, in partnership with Nu Mexico, the Institutional Research Line on Law and Artificial Intelligence (LIDIA for Spanish acronym) from UNAM’s Institute of Legal Research, and the Brazilian Embassy in Mexico, have launched the study “Towards a public policy for financial inclusion: opportunities and challenges for Mexico.” This analysis identifies structural barriers to financial inclusion, such as the banking sector’s concentration and the slow adoption of digital technologies.

Proposals for a more inclusive financial system

The study outlines key recommendations to create a more inclusive and equitable financial system, including:

• Adoption of instant payments to simplify digital transfers between platforms.
• Use of alternative identification methods such as biometrics to facilitate remote account opening.
• Regulatory flexibility to integrate technologies like artificial intelligence and data analytics for improved risk management and product offerings.
• Development of financial products with integrated educational tools to promote responsible service usage.

Balancing Regulation and Innovation

The study highlights Brazil’s success, where the Pix instant payment platform—adopted by 77% of the population—illustrates how balanced regulation can drive competition and financial digitalization. In contrast, Mexico’s Fintech Law has had a limited impact, with traditional institutions still controlling 65% of banking assets, limiting access to more competitive financial products.

Digital finance companies, however, show significant potential to close gaps in Mexico. For instance, 19% of new credit card users from these companies were previously unbanked, while 48% were underbanked. This demonstrates how financial digitalization can serve as a vital tool to include historically excluded populations.

The study concludes that Mexico must implement a new national financial inclusion policy that addresses the needs of its population. This effort should involve the government, traditional and digital financial institutions, academia, and civil society, aiming to achieve financial inclusion rates above 85% in the short term, particularly among the most vulnerable sectors.