According to figures from the National Institute of Statistics and Geography (Inegi), only 47 percent of Mexicans have a bank account. However, the bulk of the population that can access these services lives in urban areas and has a medium-high income level, the rest of the population is excluded. These data do not differ much from those presented by the World Bank.
Thus, financial services are directly related to factors that determine the economic growth of a country, such as social welfare, access to financing to acquire assets, and financial solutions to improve the quality of life such as a savings account or health insurance, among others.
The importance of financial inclusion is fundamental, and the Ministry of Finance and Public Credit (SHCP) marked this strategy as a priority in the National Development Financing Program 2020-2024, since it allows “strengthening the macroeconomic foundations to promote stability, equitable economic growth, and the well-being of the population.”
“Financial inclusion has multiple benefits, not only at the personal or family level but also at the macroeconomic level. Those who cannot access the benefits of banking are the least favored sectors and coincidentally are also those who most need this boost to improve their personal financial management and improve their quality of life. For example, a person who is self-employed requires a safe place to keep his money and a banking institution that supports him to grow his business,” said the president and co-founder of Miio, the first telco bank in Latin America, Modesto Gutiérrez Losada.
In addition, the high levels of informality are another factor that promotes the low penetration of banking in the Mexican population and does not allow closing the existing gap, “which becomes a vicious circle, but if we achieve the transition to formality through financial inclusion, the benefits for the population would be direct: greater social security, greater financial education, and economic capacity to face adverse contexts,” added the president of Miio.
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The banking system in Mexico is not inclusive
One of the reasons for the lack of financial inclusion is that the traditional banking system is not inclusive. While it is true that banks have done a great deal to digitize and offer more and better products, these only reach users who are already banked, not those in the informal sector, so the gap remains open.
According to the Inter-American Development Bank (IDB), financial inclusion has been recognized as a facilitator of 7 of the 17 Sustainable Development Goals, so promoting access to financial products and services drives innovation, growth and wider access to international markets.
How the fintech sector can help with the financial inclusion
In recent years, technological innovation has brought new trends to the financial world, including fintech, which occupies a special place worldwide in the development of the financial system.
The fintech sector has positioned itself as a low-cost alternative, open to meet the needs of consumers excluded by traditional banking; in other words, it is a key player in financial inclusion, even the purpose of many of them is to serve the low sectors or small businesses that can hardly access financing to a business account.
The development of the fintech sector is largely motivated by the growing adoption of smartphones and the expansion of the internet. In fact, it is predicted that by 2022, 90 percent of Internet connections in Latin America will be made through mobile devices, according to 5G Americas.
The Fintech ecosystem is growing by leaps and bounds, since according to Finnovista’s Fintech Mexico 2020 Radar, since 2016 this sector has an average annual rate of 23 percent, which speaks to the high social demand the country has for these services and how Fintech is playing an important role in meeting it.
However, there is still a long way to go to achieve greater financial inclusion, online lending has evolved a lot, but the problem is that usually these solutions are aimed at the banked market, it requires access to consumer credit without a bank account or credit history.
How to solve the problem?
Currently it is known that the Internet and mobile devices can make a difference in financial inclusion, given their high penetration. However, the quality and price of mobile data is still a limitation.
In Mexico, 75 percent of the population with a cell phone has a data connection through WIFI networks, making the country the second (after Bolivia) with the highest cost in cell phones. Thus the high cost of the internet means that, although digital financial options exist in the country, access to them is not always possible for a large number of people.
“A financial solution cannot be complete if it does not have a telephone service that allows the user to access his bank account every time he needs it, and without this implying an extra expense. Telco Banks have reinvented banking by merging the benefits of telecommunications with digital banking. This is a new way of seeing and understanding financial services,” said Modesto Gutiérrez.
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First published in DNF, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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