Regulation Led Fintech Companies in Mexico to Multiple Banking

The fintech sector was marked by the migration to multiple banking during 2024. Various financial technology companies operating as Popular Financial Companies (Sofipos) or Financial Technology Institutions (ITFs) submitted their application to operate as a Multiple Banking institution.

According to experts, this trend was due both to the maturity of the sector and to a regulatory framework that is not adequate to the current state of the financial sector.

Why fintech companies want to operate as Multiple Banking instutitions

According to the most recent information, nine applications to establish a bank were submitted throughout 2023 and up to October 14th, 2024, plus Klar’s petition, which was made public in November 2024.

However, of those nine requests for multiple banking , four were withdrawn, so they are not in the process to obtain the banking license, and one of them recently received the approval of the authority to operate Plata Card, now Banco Plata, so there could be five formal applications in process at the CNBV.

According to Álvaro Vértiz, director in Mexico of the consulting firm Dentons Global Advisors, this trend could originate in the limitations of current financial regulation.

The current regulations for Sofipos and Multiple Banking are not designed for entities with completely technological operations, nor do they contemplate a clear model for the transition between regulatory figures or the specific focus on the products they offer.

“Banking regulations will need to be adjusted, as will the regulations applicable to investment fund operators, among others. These actors face a different reality and should not be subject to the same rules as traditional players. The sector expects more flexible regulations,” said Vértiz.

Vértiz explained that the models could be different because their operation is based on different elements. By not having physical branches and relying heavily on technologies such as Big Data and Artificial Intelligence for financial models and credit reports, these actors will require specific regulatory approaches.

Some of the players expressed their reasons for seeking the multiple banking license, including the limitations that their players offer, such as restrictions on offering a payroll product, a product that their users constantly demand. These limitations were detected by the Federal Economic Competition Commission (Cofece).

Fintech sector maturity

For his part, Carlos Valderrama, director of Legal Paradox, a law firm specializing in fintech, explained that the current trend is due to the fact that the multiple banking license represents the highest level of regulation, allowing for the offering of a full range of services.

Although the “Fintech Radar 2024”, prepared by Finnovista, indicated that 44.1% of the fintech market in Mexico does not need any type of license to operate, the majority (55.9%) must operate under some license contemplated by law.

Valderrama explained that as these fintechs gain ground in the digital realm and in basic financial products, they have the opportunity to apply their technological capabilities and the efficiencies they have developed. This opens up the possibility for them to expand into financial products and services that, for now, they are not authorized to offer.

“2025 will be key for the consolidation of the Mexican fintech ecosystem, which will end up positioning itself as the center of financial innovation in Latin America. The growth that will be seen in this sector will be driven, in part, by foreign influences, such as the case of the United Kingdom, which is a benchmark in the fintech field. In the next five years, this growth could turn Mexico into the ‘crown jewel’ for financial innovation, attracting the attention of more international players,” said Valderrama.

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(Featured image by Tumisu via Pixabay)

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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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