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Why More Fintech Companies Will Seek a Banking License

Fintech companies in Mexico, seeking to expand their offerings, are eyeing banking licenses until the Fintech Law is updated. Sebastian de Lara of Fintech México anticipates more companies transitioning to banking licenses to broaden services, emphasizing they’ll still retain their fintech essence. Ualá, Kapital, and Nu are among those pursuing banking licenses, indicating a trend toward broader financial services.



banking license

As long as there is no update to the Fintech Law, it is foreseeable that more entities of this type, especially the largest ones, will seek a banking license to be able to offer more services and products in the Mexican market, and thereby grow the business.

Sebastián de Lara, director of Fintech México, explains in an interview that some institutions that began under this figure in the country matured and that is why they initially opted for popular financial companies (Sofipos), since this allows them to offer more products, but also with limitations; although now they are going for the banking figure.

“I think that until there is a reform, a modification, or a modernization of the Fintech Law, we are going to continue seeing it, because the thresholds that the Electronic Payment Fund Institutions (IFPE’s) have, they can no longer be intermediaries, give returns, So they seek to be the natural thing that has happened, they seek to be Sofipos,” he says.

He adds: “and now if I want payroll portability, well, I have to be a bank there, so they are going to look for these things. It seems normal to me to see that other companies that are already at this level of maturity seek a banking license, it seems to me that it is going to happen, I don’t know if it is a wave, but we are going to see more.”

However, it states that they are still financial technology companies and that essence does not change.

“Any of our companies that become a bank, we see it as something extremely positive, because they are allowing us to increase the services they are providing and they continue to be fintech,” he emphasizes.

Ualá and Kapital are two of the fintech companies that have purchased a banking license, ABC and Autofin, respectively. Nu, for its part, has submitted the request to the National Banking and Securities Commission to obtain it. While Revolut was authorized to become a bank just a few days ago, although there are still processes to go through.

banking license
Fintech companies in Mexico, seeking to expand their offerings, are eyeing banking license until the Fintech Law is updated. Source

That IFPE’s can offer more services

Sebastián de Lara explained that if one day there are modifications so that the IFPE’s can offer more services under this same figure, perhaps changing to others will no longer be so necessary.

“A little like the regulation in Brazil, you acquire small licenses for the different products that you provide, and when you have collected a certain amount, you are already a bank, I would see it a little that I wish it could be like that in Mexico. This is not the case, but eventually with a reform to the Fintech Law, we could get there,” she emphasizes.

It highlights that the Fintech Law was very successful in 2018, when it came into force, but it was made for the present of that time. “We outgrew it very quickly.”

He explained that for an IFPE it is important to be regulated, “but then they want to grow and do more things. So we have to make a Fintech Law not only for 2024, but for 2040, think about the future, what the next frontiers will be, and if we do that analysis, we can really generate a new law where perhaps the IFPE’s “They serve as a kind of 100% digital financial institutions, allowing users to have experiences similar to banks,” he argues.

The benefits of a banking license

In this sense, regarding the possibility of more fintech companies migrating to the banking sector, the Association of Banks of Mexico (ABM) recently reiterated that competition is welcome and that there are more members in the sector, but with a level playing field for the same activities.

“It’s good to see that being a bank and having a banking license also allows you to have many more products and services and do a lot more business than in other segments, which (however) we think should continue to exist, fintech company, Sofipos, Sofomes, credit unions, etc., because they have a particular objective,” said Julio Carranza, president of the ABM, a few days ago.


(Featured image by Adeolu Eletu via Unsplash)

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First published in EL ECONOMISTA. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Sharon Harris is a feminist and a part-time nomad. She reports about businesses primarily involved in tech, CBD, and crypto. She started her career as a product manager at a Silicon Valley startup but now enjoys a new life as a personal finance geek and writer. Her primary aim is to provide readers with a new perspective on the overlapping world of finance and technology.