Contxto – Between July 2018 to May 2019, the net growth of Mexico’s fintech ecosystem grew by 18 percent, according to Finnovista‘s reports from these dates. Around 100 new fintech startups sprouted during this time, bringing the number of Mexican fintech startups to 394.
This report saw the outcomes of the recently enacted Fintech Law, which gives more legal certainty to companies and investors operating under this industry.
The historic legislation came into effect on March 10, 2018. With this, Mexico became one of the first countries in the world to create regulatory frameworks for fintech startups. A secondary set of provision began on September 10 of that same year for fintech institutions (FTIs).
Specifically, the Fintech Law ensures that FTIs meet all of the legal requirements and provide the necessary documentation to operate. Meanwhile, the policy provides guidelines for FTI shareholder, board members, executive officers, risk management, etc.
“Mexico consolidates itself as an indisputable leader for financial innovation in Latin America,” said Finnovista regarding the expansion.
Prior to these laws, according to Finnovista, funding opportunities for Mexican FTIs were far from desirable. Since the legislation, though, the sector is garnering more collaborations.
Net growth grew 18 percent among new fintech players between Finnovista’s July 2018 report to its May 2019 report.
“The increase in this number is affected by two phenomena,” said Finnovista, that collaborated with the Mexican research center, Endeavor, to gather this information.
On one hand, we found the existence of 98 new startups created in recent months, which represents a gross growth of 29.3 percent. On the other hand, we have estimated that the mortality of fintech startups since last year amounts to 11.3 percent.
Mexico’s fintech enterprise has traditionally supported FTIs involved in payments, remittances, and loans. These industry segments represent approximately 40.7 percent of national fintech startups, signaling that their prominence is rising.
Other flourishing parts of the industry have also seen high annual growth. The digital banking industry, for example, increased by 200 percent. This clearly shows that there is a market, and startups such as Flink, albo, and Hey will be gradually adopted by more people.
FTIs devoted to insurance, identify theft prevention, and business technologies also saw sustained growth rates of around 30 percent. While many areas continue to improve, recent findings show that some sub-sectors are struggling.
On one side of the equation, the new federal policies triggered a growth spurt. Additionally, it reassured investors that Mexico’s rule of law is solid enough when it comes to modern financial technologies.
However, Finnovista’s recent survey shows that 52 percent of respondents believe that the legislation will actually deter growth in the long run. That is to say, it will be more challenging for startups to enter the market. More legal requirements, paperwork and permits are expected to create higher barriers of entry.