The current COVID-19 pandemic has led to a growth in demand for remote financial services, to the extent that some financial technology platforms (fintech) have grown in these months of the emergency to an impressive extent, which has previously been projected would happen in five years.
According to Carlos Valderrama, managing partner of Legal Paradox, he highlighted that in a context where it has become essential to carry out financial operations at a distance, fintech companies have gained ground because they seek to offer personalized solutions, which is sometimes difficult to find in the range of traditional financial services.
“The fintech or blockchain sector has had in these two or three months of pandemic, an exponential growth, with some companies able to generate the growth they had projected in two or five years,” said Valderrama.
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The Fintech sector in Mexico recorded a growth in the last years
At a press conference, the Legal Paradox representative highlighted the growth that the fintech ecosystem has had in recent years, stating that there are currently around 640 active platforms in Mexico.
“The distance imposed by the health emergency has had an impact on the use of financial services, most branches have had to close partially. There is even a line of people, outside the branches, trying to access these services, who would have to be careful in this context to avoid getting infected. The truth is that contactless operations through fintech platforms not only contribute to financial inclusion but also to the mere fact of surviving,” explained Valderrama.
The representative of Legal Paradox emphasized that the regulatory issue is essential to accompany the growth of an ecosystem. Mexico has supported the fintech sector with a regulation enacted since 2018. The country is currently in the process of authorizing companies that will operate under this regulatory framework.
Given the use of these technologies in online financial services, such as transfers, loans, purchases and sales, it is necessary to regulate the handling of information and the protection of data. The Fintech companies in Mexico lack financial transparency, which makes them vulnerable, both in terms of credit conditions that contract, their rights as well as the final cost of financing. Adequate regulation for this sector could increase capital inflow, as investors seek to enter regulated companies.
The COVID-19 pandemic was beneficial to the fintech sector
Valderrama explained that according to estimates of Endeavor Intelligence, from January to May this year technology companies, mostly in the Fintech sector, raised just over $300 million, of which $210 million were via investment funds and $118 million for debt.
Within the radar made by this firm, Mexico City, Nuevo Leon, Jalisco, Queretaro and the State of Mexico, are the five entities with the biggest number of fintech companies in the country, while Chihuahua, Durango, Zacatecas, Guerrero, Hidalgo, Tlaxcala and Tabasco, are states where there is no presence of such companies.
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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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