Mexico

As of January 2022, 74% of Mexicans had access to the Internet. The connectivity has risen rapidly and is expected to continue rising since the nation’s Constitution was amended in 2013 to guarantee universal online access.

In January 2017, the Mexican Congress passed the General Data Protection Law providing Mexican citizens with a level of control on how their data is used by corporations and the state. Like with all development in the Open finance domain, privacy law such as this can be considered as a helpful foundation. 

In March 2018, following collaborative work between the Hacienda, financial regulators, the Presidency and the Congress, produced new legislation called the Law to Regulate Financial Institutions (widely referred to as the Fintech Law). 

The Ministry of Finance and Public Credit (Hacienda) is responsible for the primary interpretation of the law, and has delegated the powers of secondary regulation to various financial regulators in the financial system. In relation to Open Banking, the relevant regulators are the National Banking and Securities Commission (CNBV) and the Central Bank (Banxico). 

The CNBV has the primary responsibility for handling the process of regulation for companies and in the data sharing provisions of open finance. The role of payment initiation, as a Third Party Provider (TPP), was not included as an article in the law, and payment systems sit under the domain of Banxico. Outside the law making, Banxico has used their existing powers to develop rule making in relation to payment initiation. There is therefore nothing that is structured in the legal and policy framework which requires any consultation or alignment between the parties in the development of technical standards, liability frameworks, the supervisory perimeter or managing implementation.

Article 76 of the Fintech Law, required an open finance regulatory and policy framework to support implementation delivery within 2 years. The Fintech Law anticipated the set up of a new authority to oversee fintech firms. The new authority was never set up and the CNBV assumed all the responsibilities for the creation of a new finance regime and for the licensing of Fintech firms. 

Since 2018, there have been a number of leadership changes within the CNBV. Given the complexity of open finance and the interplay in a pleural ecosystem between the laws, regulations, technologies and customer protections there have been challenges in getting material progress.

Following the issuance of Circulars to decree next steps by the CNBV, various consulting firms have been retained to help deliver technology standards. This work was carried out in the absence of the required policy, funding and governance direction within which they might have been effective. As a result, this work appears to have largely been discarded.

As of July 2024, progress in development of an Open Banking ecosystem has largely been maintained by the private sector. There has been a history of a limited amount of screen scraping activity and some commercial APIs. Many of the larger banks in Mexico do not materially engage in the attempt to progress, although some do. The Mexican Fintech association remains steadfast in its advocacy of progress in this domain, and has a very active community, working with the interested banks in an ‘Open Finance Tribe’. This group arranges active meetups and prepares documents such as in the utility of Open Finance to support access to credit. 

Fintech Mexico’s core mission to deliver Open Finance is underpinned by

• the promotion of Financial inclusion, 
• dialogue with regulators and authorities, 
• positioning use cases as enablers of innovation and competition,
• articulating the role of explicit consent, privacy and security 
• communicating to potential users the benefits and operations of Open Finance

There is an increasing level of cross border sharing of information relating to open finance by the Fintech associations of LATAM. This appears to be more focused amongst the Spanish speaking countries who are still working on the topics although there is much reference information available from Brazil as well as the UK.

There are many banks and Fintechs operating or seeking to operate in LATAM who would benefit from the lower cost implementation, security features and speed to market that would be delivered by alignment. 

Many of the use cases of Open Banking have evolved to use both data access and payment initiation with business models. To deliver a cohesive end customer user experience, as well as reducing implementation costs and providing both fraud prevention and availability of funds guardrails it would make a lot of sense for the financial sector, Banxico and CNBV to focus efforts to deliver the specifications, policy development and governance to ensure risks are not introduced by the absence of structuring payment initiation in the Fintech Law.

Cash remains prevalent in Mexican society, particularly in rural areas. Large parts of the population remain unbanked. For those who are banked, card usage has been steadily increasing. 

An attempt to introduce a customer facing smart application for customers, called Codi, was hampered by some challenges in customer experience.  

In 2023, 71% of the population (92m users) had access to smartphones. Penetration has been increasing rapidly up from 56% in 2018. 

In March 2023, Banxico launched Dinero Movil (DiMo), a service that enables users to make instant bank transfers through the country’s real-time gross settlement system, which is known by the acronym SPEI. DiMo offers a much more user friendly experience utilising mobile phone numbers as a proxy to link bank accounts. This experience is expected to take advantage of the increasing mobile penetration and reduce reliance on cash. As it was launched, DiMo was not made mandatory for institutions, but major banks such as BBVA, Santander and HSBC have already adopted it.

As part of the policy to drive digitisation and financial inclusion, Banxico adjusted regulation to encourage institutions to open accounts more easily. These ‘Level 2’ transactional accounts have a restricted monthly deposit limit of c. USD $1000.

As an innovation Banxico has also provisioned a DiMo app enabling people to open a bank account at a participating institution. The banks have been experimenting with ways to improve the customer experience and reduce the onboarding time. Whilst they have the opportunity to charge, as the service is rolled out there has been zero cost to the consumers to help drive adoption. As with Pix in Brazil, DiMo offers potential in providing a method to support Open Banking payments as well as supporting peer to peer payments.  

On the 2nd June 2024, Claudia Sheinbaum was elected as Mexico’s first female president. As of July 2024, there is another round of changes at the CNBV anticipated.

The original policy objectives of the Fintech Law have not yet been met. There has been some signs of the Hacienda, Banxico and CNBV leadership becoming more coordinated on these topics and there is widespread hope among the advocates of Open Finance that the new government and regulatory officials will accelerate progress which in turn would promote both financial inclusion as well as mobilising investment in the economy.

Mexico has a developing tech scene, culture of entrepreneurship and some excellent examples of innovation. Following the 2018 Fintech Law, there was an increasing flow of venture capital directed to fintech companies. As a result, of the slower than expected progress in developing the secondary regulation and the governance structures for Open Finance, fintech firms have found it increasingly hard to access expansion capital and execute on some of the opportunities that were widely anticipated.

Mexico has a large tech talent pool. The Mexican government’s recent infrastructural and educational improvements have resulted in more people having the resources and tools to expand their skills. To show its resolve to end the shortage of technology talent, the Mexican government opened 120 tuition-free specialist technology universities between 2006 and 2012. Every year, over 130,000 engineers graduate in Mexico. With its talent pool of over 700,000 developers, Mexico has become a hotbed of software engineering talent within Latin America.