MEXICO CITY (reuters) – Mexico’s banking regulator CNBV said Thursday at the request of the 85 companies to formally operate in the country under the new fintech law, as well as the government of President Andres Manuel Lopez Obrador is pushing for is financial integration.
FILE PHOTO: Mexico’s President, Andres Manuel Lopez Obrador attends a press conference at the National Palace in Mexico City, Mexico, on May 31, 2019. This photo was taken on May 31, 2019. REUTERS/Henry Romero
The government is looking to banks and fintechs, as it is aimed at reducing the amount of cash in circulation in order to cut down on money-laundering and corruption, and to draw more people into the formal economy.
Of the 85 fintechs and 60s, used to work as a processor of electronic payments, and 25 of the public finance of the companies, the CNBV said in a statement. It has no indication of when the authorization process is complete.
The CNBV said the fintechs that are not yet requested, consent would no longer be allowed to work in the country, and would face penalties if they did so. Mexican Fintech Law, which was issued in March of 2018.
Phone-based banking has proved to be a hit among the poor in emerging markets such as China, India, and Kenya. These efforts have been driven by the private sector companies that offer easy-to-use, affordable mobile apps.
In Mexico it is estimated that about 44% of the adult population does not have its own financial products. Many people are put off by the steep banking charges and the past scandals, whether or not they are too poor to save. Others choose to bypass the formal banking system is to remain off the radar of the tax collectors.
(For a graphic on financial inclusion in Mexico, see tmsnrt.rs/2IhXe8R)
Efforts to increase financial inclusion, led by the Minister of Finance, Arturo Herrera, who told Reuters in an interview earlier this year that the government planned to make the transition to direct deposit or electronic purse to see the benefits.
Herrera also expressed optimism that the fintechs could finally get some much-needed competition in the money transfer business, reducing the cost of remittances sent home by Mexicans abroad, and, therefore, is in favour of the poor, who are dependent on these transfers.
The notice to the CNBV, comes a day after the Spanish bank, Santander, said the venture capital fund, InnoVentures, a $57,5-million-seed-investment-in-the-Mexican-fintech startup-Klar, in what was the largest single investment in the country so far.
InnoVentures, the $200 million in capital and has invested in 25 fintech startups since it was founded in the year 2014. Mexico, Klar received a $7.5 million equity capital and $50 million in debt.
Report by Stefanie Eschenbacher; Editing by Cynthia Osterman