FINTECH IN THE WORLD

THE DIGITAL REVOLUTION IN FINANCE

HAS ARRIVED IN MEXICO

CREDITS &
THANKS
FRANCIS N. GONZÁLEZ DIAZ
General Director of the National Bank of Foreign Trade

ARTURO SOJO QUIROZ

Business Management Director

CESAR ARIEL CARRIZO

Director of Social Communication

MARIANA VICTORIA
MORALES RODRÍGUEZ
Deputy Director of Innovation and Business Development FinTech

NEIDY ESPÍNDOLA MORENO

Deputy Director of Marketing, Advertising and Institutional Image

PILAR MADRAZO
Editorial Coordination
Academic Anáhuac University Mexico

MACARENA BANÚS
Ecosystem Development Manager
Finnovista

ANDRES FONTAO
Co-founder and Managing Partner
Finnovista
 INDEX

FINTECH IN THE WORLD...............................................................................1

Evolution of FinTech...............................................................................13
Ecosystem description.............................................................................19
Industry segments and sub-segments......................................................23
PAYMENTS...............................................................................................23
AND REMITTANCES...............................................................................23
LOANS.......................................................................................................25
CROWD......................................................................................................26
FUNDING...................................................................................................26
MANAGEMENT........................................................................................28
PERSONAL FINANCE..............................................................................28
MANAGEMENT........................................................................................29
FINANCE...................................................................................................29
BUSINESS..................................................................................................29
FINANCIAL INSTITUTIONS...................................................................32
TRADING...................................................................................................33
AND MARKETS........................................................................................33
OF CAPITAL..............................................................................................33
MANAGEMENT DIGITAL BANKING................................................34
PATRIMONIAL.........................................................................................34
REGTECH..................................................................................................35
PROPTECH................................................................................................35
EXPORTTECH...........................................................................................35
Technologies used in FinTech.................................................................35
You basically have Silicon Valley, Wall Street, and Washington,
DC, and everything, in one place.......................................................51
 India.........................................................................................................58
The users are young people between 25 and 34 years old, as is
the case in most ecosystems..............................................................59
Industry size............................................................................................67
Analysis of established businesses..........................................................76
O.G..................................................................................................................80
00000..............................................................................................................80
000000000......................................................................................................80
000000009......................................................................................................80
Collaboration between financial institutions and FinTech startups........93
Customer focus........................................................................................98
Data security and privacy......................................................................103
GAFA: The technological giants...........................................................107
Google's main incentive to venture into finance is access to data.
...............................................................................................................107
Conclusion...........................................................................................................111
BANCOMEXT

l under the influence of

technological
nological in all human
activities, as well as in the
values of society,
changes

entail a
phenomenon
characterized
connectivity
by
of
is
the
all
participating in the industry,
the new credit providers and
mainly
evident
those

challenge for all economic transactional operators, and the

sectors including institutions. customer focus.
financial institutions, such as The digital revolution in
Bancomext. Technological and finance It closes an enormous
digital innovation represents for potential to improve people's
banks and, in particular, for lives, but it represents a
development banks, an opportunity paradigm shift. In an
to improve efficiency and increasingly technological and
productivity that provides digitalized context, customers
greater support to companies. demand They give you a way to
Today, technology is an ally that manage your personal and business
facilitates business activity and finances in a different way.
plays a fundamental role in rent. In response, Fintech
economic growth, which gives a companies have based their
crucial role to the federal business models on personalized
government's initiatives to alternative services with a value
promote national competitiveness proposition focused on increasing
through the use of technologies. creativity, through fresh,
In terms of innovation, the flexible practices and capable of
industry fi nancial has been one understanding the client beyond
of the first to adopt new what traditional institutions do.
technology, therefore, the With the purpose of having a
digital revolution that this framework that helps to better
sector is experiencing today understand what is happening with
should not be turn on However, it financial technologies in the
must be recognized that the speed world and in Mexico, this book
of technological change analyzes the recent evolution of
experienced by financial services companies. sas Fintech, the most
has a disruptive impact on the important business models, their
entire economy, unlike what risks, as well as their interest
happens in other industries. ration with traditional financial
trias. The milestone that marks intermediaries. This is intended
the before and after of this to generate easily accessible
6
educational content to innovation to achieve the
collaborate with the construction fundamental objectives of
of an ecosystem. ma Virtuous inclusion, equality and economic
Fintech, where knowledge forges benefit.
the foundations of sustainable

Francisco N. González Díaz . General Director of the National Bank of Foreign Trade

7
CHAPTER 1

Introduction
 Bancomext

Financial services institutions could be facing one of their greatest

challenges of all time or beginning one of the most disruptive
journeys they have ever imagined. They have largely been seen
struggling with incompetent legacy systems, robust regulatory
burdens, and rival leadership over the balance between short-term
profitability and long-term viability. But above all today, the
conversations Executive meetings increasingly revolve around the
importance of developing customer-centric rather than product-
centric solutions.

Yes
However, with traditional financial
are the institutions, to validate and
firms deliver their solutions to a
financiall critical mass of clients, in
y traditional societies putting addition to being sustainable
this philosophy into practice? over time.
And what specifically are those FinTech refers to solutions
“moments of truth” that have the fi financial opportunities
greatest impact on clients who facilitated by technology. In
choose them to meet their various environments it is seen
financial needs? as a term detonated by the union
Technological Finance or of beings. financial vices and
FinTech for its abbreviation in information and communication
English (Financial Te technologies (ICT). However, the
chnologies), today represent a link between finance and
new alternative in the financial technology has a long history. It
environment. From an investment is an ecosystem that has evolved
standpoint, FinTech venture in three different eras. The
capital funding has been first was the impact of
staggering, resulting in billions globalization, which occurred
of dollars raised. A significant between 1866 and 1987. It is
reduction in entry barriers has known as FinTech 1.0 and was
been achieved, as well as an supported by the development of
increase in digital demands from technological infrastructure such
clients who now use them. The as transatlantic transmission
challenge is for these businesses cables. This was followed by the
to coexist within an ecosystem of era of FinTech 2.0, between 1987
collaboration and integration and 2008, during which firms

9
 Fintech in the world: the digital revolution in finance has arrived in Mexico

increasingly digitalized their to capital. such and the

processes. It was from 2008 when accelerated advances in
a new era of FinTech emerged in technology gy [ 9 ] . This has not
the world, FinTech 3.0. This is been different in emerging
not defined by financial products countries where, in addition to
or services these factors, there are greater
The new entrants represent a unmet financial needs,
international regulatory
paradigm shift within traditional
authorities focused on generating
financial businesses. Its new models a favorable environment for the
expeditiously carry out management, satisfaction of these needs, a
high technological penetration
as well as the launch of products and
and the growing collaboration of
services, based on decisive attention traditional financial
to customer needs. institutions to generate
alliances. strategic deals with
startups.
offered, but by those who offer
In Latin America the sector is
and deliver them. The latest
created ceding Brazil is the
evolution of FinTech, led by
leading country with 377 startups
startups, poses challenges for
[ 27 ] followed by Mexico with 334
both regulators and participating
FinTech startups [ 32 ] . Next come
markets, in particular to balance
Colombia with 124 [ 29 ] , Argentina
the potential benefits of
with 110 [ 26 ] , Chile with 75
innovation with the potential
[ 28 ] , Peru with 45 [ 31 ] and
risks of new approaches [2] . At
Ecuador with just 31 new
this stage, new entrants
companies [ 30 ] . Unlike developed
represent a paradigm shift within
economies lled, the region has a
traditional financial businesses.
scarce 37% of its population
Their new models perform expe
banked, which accentuates the
dita, management, as well as the
importance of financial inclusion
launch of products and services,
as one of the main objectives of
based on decisive attention to
the 21st century for governments
customer needs. They are
[4] .
completely dedicated to
Therefore, there is a great
innovation, and are even willing
opportunity and need for Fintechs
to pivot their ideas until they
to serve clients excluded from
reach one that meets the clients'
the financial system, with an
requirements.
emphasis on providing all
The digital transformation of
financial services has occurred
around the world thanks to the There is a great opportunity and need
variability of four elements:
for Fintechs to serve clients excluded
greater customer demand, lower
barriers to entry, better access from the financial system,

10
 Fintech in the world: the digital revolution in finance has arrived in Mexico

emphasizing providing all those counteract the low profit margins that
products that meet the needs, as well result from serving marginalized
as reducing operational costs to segments of the system.
those products that adapt to the providers instead of going to
needs, as well as reducing traditional means. It also
operational costs to counteract reveals that what they are
the low profit margins that looking for is a broader range of
result from serving marginalized services and a better customer
segments of the system. experience.
To place Mexico in the global
context, it is important to
Under such context, the purpose of
analyze the FinTech adoption rate
of active digital consumers. This this book is to highlight the details of
index was developed by the the Mexican FinTech ecosystem,
consulting firm EY (Ernst &
methodically describing the state of
Young) and launched since 2015
with the purpose of understanding the art, the development and growth
whether consumers were really achieved, global trends and the
using using FinTech services on a
opportunities that arise for the region,
regular basis. For Mexico, it is
revealing that within the 2017 as well as the factors that guarantee
index it occupies 7th place in sustainability, such as regulation and
adoption (36%) only after Spain
alliances with financial institutions.
(37%), and above the United
States (33%). The first chapter offers an overview
of the sector through measures of the
It is relatively easy for Mexicans to number of startups, business volume,
open an account with new FinTech segmentation, types of clients, jobs
providers instead of going through and fundraising. The second chapter
traditional means. presents an analysis of the industry
addressing growth issues, trends, as
Of the 20 markets analyzed, the well as a benchmark with the most
global average adoption of these
important developed economies that
technologies is 33%. China has
the highest adoption rate with have adopted the mechanism. The
69% of digitally active consumers third chapter summarizes the
regularly using all the solutions
strategies defined so that this sector
offered [ 13 ] . The position in the
adoption index warns that it is in Mexico lasts over time and is
relatively easy for Mexicans to inserted in the financial field.
open an account with new FinTech

11
EPISODE 2

History of
FinTech:
background
and
character
ristic
 Bancomext

The FinTech concept, which in Spanish translates to Technological

Finance, results from the union of financial services and
information technologies. FinTech has been around for at least 150
years, when Edward Callahan invented the Ticker tape, the oldest
digital electronic medium used for transmitting stock prices via
telegraph. However, in recent times, FinTech has taken an
evolutionary and explosive leap, since the new business models of
startups have focused their attention not only on improving financial
services and making them more efficient, but also on altering
business models. service that the financial industry has had for
centuries.

TO
At the end of • The world's first automated
the day this is teller machine (ATM) was
all about money. opened in 1967 by Barclays.
My money, your
money, our money, and how we - as • The first online checking
individuals and institutions nes account was used in 1995 by
- we participate in trade, global Wells Fargo.
and local. It is an essential • The largest online payment
part of what has We act as processing platform, Pay-Pal,
humans, regardless of the type of was founded in 1998.
economic, political or social • The first cryptocurrency was
system to which we belong. launched in 2009 - Bitcoin.
Commerce is essential to • The launch of “Apple Pay” in
existence, and that is why 2016.
FinTech is exciting. It can be concluded that
FinTech has traveled go a long
Evolution of FinTech way. It has transitioned from
ATMs and simple electronic

d ver the last 100 years we

have seen the achievement
of a large number of
milestones in the history of the
development of financial
payments, to fully
banking, and even to digital
online

currencies. But the evolution can

be summarized in three stages [2] :
1. FinTech 1.0 (1866 – 1987):
technology. Some benchmarks are [2] from the logical to digital.
: 2. FinTech 2.0 (1987 – 2008):

13
 Fintech in the world: the digital revolution in finance has arrived in Mexico

development llo of traditional Corporation in 1964 and by 1967 [ 2

digital financial services. ] , the first ATM was installed by

3. FinTech 3.0 (2009 – Barclays in the United Kingdom.

present): digital With the installation of the
democratization of financial first ATM, the migration of
services. financial services from analog to
FinTech 1.0 (1866-1987) digital was consolidated. What
does this mean? Analog technology
It turns out that finance and refers to the translation of data
technology have reinforced each for transmission in the form of
other since their early stages. electrical impulses of varying
Many historians today share the amplitude; while digital
opinion that the financial technology translates information
revolution in Europe at the end through a binary system (0 and 1)
of the 15th century, in which where each bit is representative
insurance and banking companies of two different amplitudes. An
coexisted, played an essential example of an analog signal is
role in the Revo Industrial the human voice through a
solution. By the end of the 19th microphone and an example of a
century, the combination of digital signal is found in
finance and technology gave rise personal computers.
to the first period of financial Some key developments of this
globalization that lasted until stage were, in the payment areas,
the beginning of the First World the clearing tables for exchange
War. During this period the between banks in England and the
telegraph, railways, canals and United States. In the securities
steamships supported links area, the establishment of the
between borders allowing the NASDAQ in 1971 and the end of
transmission of financial fixed securities commissions, as
information, transactions and well as the development of the
payments around the world. National Stock Market, which mark
During the postwar period in the transition from physical
the South technological advances, trading of securities to fully
particularly derived from electronic negotiations.
wartime, such as information Additionally, it was in this
technologies and code-breaking period when most banks replaced
tools, developed Commercially their paper forms with
developed in the first computers computerized formats and began to
such as the International manage risk through technologies
Business Machines (IBM), the developed for this.
first financial calculator
produced by the company was also FinTech 2.0 (1987 – 2008)
created. Texas Instruments dam in
1967. Likewise, telex and fax 1987 marked a new period of
were first marketed by Xerox regulation for the risks of

14
 Bancomext

financial interconnections cross- verification. By 2001, eight

border transactions and their banks in the United States had at
intersection with technology. One least one million online
of the iconic images of this customers with international
period is the investment banker reach.
using a mobile phone (first By the beginning of the 21st
appearing in the United States in century, all banks' processes had
1983) perfectly illustrated in been completely digitalized,
Oliver Stone's film “Wall Street” highlighting significant
in 1987. That same year, the investment ficative that these
stock market crash known as institutions had made in
“Black Monday” occurred, the technological information.
effect of which on markets around Additionally, the regulatory
the world demonstrated that they environment became relevant for
were interconnected through the computerized exchange systems
technology in a way that had not that these financial consortia
been seen since the crisis. 1929. used. In this context,
digitalization gave rise to
In 1987, the stock market crash better organized data that led to
a better understanding of the
known as “Black Monday” occurred,
credit risk taken by borrowers in
the effect of which on markets around such a way that it allowed a
the world demonstrated that they better-suited product offering.
neated with consumer profiles.
were interconnected through
technology. FinTech 3.0 (2009 – present)

Without a doubt, in the 1980s, During the Fintech 2.0 period,

financial services became a the expe tative was that the
digital industry, based on providers of electronic banking
transactions. electronic solutions were financial
communications between financial entities supervised activities.
institutions, financial market In fact, the use of the figure
participants and clients. By “bank” was restricted to
1998, financial services had companies duly regulated as
become, for all practical financial institutions. However,
purposes, the first digital the Fintech 3.0 era has shown
industry. However, it was the that the provision of financial
emergence of the Internet that services goes beyond regulated
formed the ideal scenario for the financial institutions. The
development of the next level beginning of this Fintech 3.0 era
beginning in 1995 with the
has shown that the provision of
American bank Wells Fargo using
the World Wide Web (WWW) to financial services goes beyond
provide online account regulated financial institutions.

15
 Fintech in the world: the digital revolution in finance has arrived in Mexico

The new era of FinTech has its unemployment and facilitating

origins in the global financial access to credit outside of
crisis of 2008, when new players traditional banking forms.
emerged in the financial markets. Therefore, new forms of
The new perceptions public tions, financing emerged and coincided
regulatory control, political with the lack of innovative
demand and economic conditions capacity of the banks, which
micas were some of the factors resulted in a financial services
that allowed this emergence. industry that since 2008 was
The financial crisis, for its affected by what was determined
part, had two important impacts to be a “perfect storm” that It
in terms of public perceptions allowed a generation of financial
and human capital. The first has market participants to establish
to do with the perception of a a new paradigm known today as
deterioration of the banks. “FinTech”. This new paradigm has
Second, as the financial crisis five commitments [9] :
turned into an economic crisis, 1. Financing and investment. It
many bankers and workers workers focuses on alternative
in the financial system were left financing mechanisms,
without jobs. They were very particularly crowdfunding and
prepared people rada, equipped peer-to-peer lending.
with a good understanding of the 2. Operations and risk
financial markets, as well as management go. It is about
skills that were able to use and investments in technology
push FinTech 3.0 to emerge. informationologies made by
Additionally, the regulations financial institutions,
of the post-financial crisis especially since 2008, when
increased the obligations tions they had to build a better
of the banks and altered their compliance system ment to
business incentives and business address the massive volume of
structures. As a result, since the post-crisis.
2007, business models and 3. Payments and infrastructure.
structures had to be reformed. Internet payments and mobile
From a political perspective, communications are a core
increased unemployment and focus of FinTech and have been
reduced access to credit the driving force of the new
challenged the legitimacy of ecosystem.
those who governed, which became 4. Data security and
a strong motivation behind the monetization. The digitized
famous regulation known as the nature of the financial
Jump Start Our Business (JOBs) industry means it is
Act in the United States in 2012 particularly vulnerable to
cybercrime and espionage, with
[15] . This regulation arises with
the latter becoming
the purpose of mitigating
increasingly important to

16
 Bancomext

geopolitics. sciences as we know them today

5. Customer focus. This will can be studied after the
continue to be the primary focus appearance of Pay Pal, an
of financial services offered by American payment company formed
FinTech companies. It is no in 2000 [ 11 ] . Pay Pal México was
longer a product issue, but founded during the second half of
rather what the customer needs. the same decade and was the first
For emerging economies, they subsidiary of the international
finance technological advances company in the region. In 2011
turned out to be an alternative and 2012, the industry's
tive of economic development. In pioneering FinTech startups
the Asia-Pacific region, for emerged, represented mainly
example, the most productive mainly by Prestadero and Kubo
accelerators for FinTech startups Financiero respectively. These
emerged. Hong Kong and Singapore companies serve the peer-to-peer
have the largest concentrations lending market. In 2012, a card
of FinTech firms in the world. payment company through mobile
With this, most Asian regulators devices also appeared, Clip. In
began to work on strategies to 2013, Konfio, an immediate
contain and harmonize the digital financing firm, was
operations of these new players [ 9 created, as well as a digital
] . microloan firm called Kueski.
Latin America did not escape Finally, in 2014 the arrival of
the wave. From Mexico City to another great pioneer of the
Buenos Aires and Santiago de Mexican ecosystem, Bitso, known
Chile, passing through Sao Paulo, as the trading house for
Lima, Quito or Bogotá, among many cryptocurrencies [ 11 ], was
other cities in the region, young relevant.
financial technology companies
began to emerge that responded to
the needs. from local markets.
Brazil contributes the largest
number of ventures followed by
Mexico and Colombia. It is
estimated that 60% of all young
FinTech companies operating today
in Latin America would have
emerged between 2014 and 2016
[4] .

In Mexico, the history of

financial technologies dates back
to the implementation of
electronic ATMs and other
solutions that streamlined
banking services. However, these

17
 Bancomext

FIGURE 1. Evolution of FinTech [ 18 ]

FINTECH 1.0

1865 Giovanni Caselli invents the pantelegraph

1866 Laying of the first transatlantic cable
1918 Fund transfer service connecting 12 reserve banks is instituted
Economist John Maynard Keynes writes about finance and technology in his
1919 book “The Economic Consequences of the Peace”
The first Diners Club credit card appears.
1950
The first electronic stock market system
1960
The global telex network is launched as a form of communication for the
1966
financial system
The first automated teller machine (ATM) is installed
Interbank clearinghouse system is established to transmit payment orders in
1967 dollars between banks around the world
1970 Nasdaq emerges – National Association of Securities Dealers Auto mated
Quotations- is established in the United States
1971 Global Interbank Financial Telecommunications Company – SWIFT –
Established to Improve Cross-Border Payments
1973 The first online brokerage is founded
Online banking appears in Great Britain
1982 The first online purchase by Tesco
1983 Black Monday affects markets around the world (Black Monday)

1984

bi 1987

FINTECH 2.0

Financial technology is coined as a 1993

term
Most US banks establish first 1998
transactional websites for banking
Financial crisis that turns into an
economic crisis
2008

2009
Bitcoin, version 0.1 of
cryptocurrencies, is released

FINTECH 3.0

2011 Google establishes Google Wallet that allows consumers to use their
Smartphone to make payments
2014 First FinTech startups in Latin America
2015 This year, for the first time, more people use mobile banking
2016 First bachelor's course on Fintech
2017 Alliances and collaborations of FinTech startups with traditional financial
institutions increase
The FinTech Law of Mexico was approved
2018
The story continues…
2019
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Ecosystem description are dedicated to providing

service financial services

Q to understand the through technology. For

competitive dynamics tive example, crowdfunding, loan,
and collaborative and remittance platforms,
approach to FinTech innovation, among others.
we must first analyze the 2. Technological developers.
ecosystem where it is developed. These are the providers and
It is a heterogeneous and creators of the technologies
instrumental ecosystem where that support FinTech startups.
entrepreneurs, government, Some of these technologies are
funds, accelerators and Big Data, Cloud Computing,
financial institutions coexist. social media, etc.
traditional ciers. Six main 3. Government. Its function is
elements that make up a FinTech mainly to regulate and legislate
ecosystem have been identified, for the ecosystem.
as shown in Figure 2: 4. Financial clients. All
1. FinTech startups. Re Indians individuals and
companies cient creation that organizations that use FinTech

FIGURE 2. FinTech Ecosystem

 Fintech in the world: the digital revolution in finance has arrived in Mexico

services. relying on a single financial

5. Traditional financial institution for their needs, are
institutions. Banks, insurance beginning to pick and choose the
companies, brokerage houses and services they value, from a
capital funds, among others. variety of FinTech companies
6. Investment funds and [ 21 ] .

accelerators. Its role is to Those who develop pro

support and promote FinTech technologies They see digital
Startups. platforms for social networks,
These elements coexist in a Big Data analysis, artificial
similar way biotics for intelligence, mobile application
innovation. In addition, they development, etc. Its objective
stimulate the economy and is to generate a favorable
facilitate collaboration and environment so that startups can
competition in the fi cial launch into the market. ced
services industry. nancial, innovative services. Thus, for
which in turn contributes to a example, Big Data technologies
constant cycle of innovation. can be used to have constant
Its ultimate objective is to knowledge of customers and their
cover the needs of the financial consumption patterns and,
client in a more agile, therefore, provide personalized
efficient and flexible way. services for them; Cloud
In Figure 2, the associations computing allows startups to
are presented tions of the six have the necessary resources to
elements. At the center is the Consumers, rather than relying on a
FinTech ecosystem, led by
single financial institution, are starting
FinTech startups. These
companies are mostly startups, to pick and choose the services they
that is, companies with just a value from a variety of FinTech
few employees. two and basically
companies.
driven by some innovative idea
in the financial fields. They
launch your products at a
cover specific market niches,
quarter of the cost. Algorithms
providing more personalized
are a constant in these ventures
services. ized and efficient
given their learning capacity
than those offered by
and adaptability of their
traditional financial
products and services. For
institutions. Their actions have
example, there are robotic
generated a phenomenon beyond
advisors in wealth management
those of financial services that
firms. Social networks, for
have affected the participation
their part, favor the growth of
of traditional institutions. Its
communities in the silver. forms
ability to unbundle financial
of crowdfunding and person-to-
services represents its greatest
person lending (P2P lending),
growth trigger. Now, the
adding transparency and
consumers Mimers, rather than

20
 Bancomext

democratizing access to young, technologically savvy and

alternative sources of live in big cities. A
financing. Mobile devices significant part of these
replace the physical clients is represented by
distribution of the products and millennials (people between 18
services that these startups and 34 years old). However, the
offer. Mobile network operators demographic future of these
provide the low-cost companies is perceived as
infrastructure necessary for favorable in terms of achieving
their operation, among many the inclusion of a greater
other examples within the number of people who today find
technological developments in themselves in situations of
the sector [ 21 ] . financial exclusion in the
The role of governments is to following decades. especially in
provide favorable regulation for emerging economies [21] .
businesses. FinTech concepts. Traditional financial
Depending on their national institutions are also an
economic development plan and important driving force in the
the economic policies prevailing ecosystem. After realizing the
in the country concerned, disruptive power of FinTech
different governments provide startups and the shrinking
different levels of regulation window of opportunity To
to encourage innovation and mitigate their impact on the
competition (eg licenses, market, they have dedicated
certifications, tax incentives, themselves to evaluating their
reduction of capital business models and developing
requirements, among others). In strategies to embrace these new
some cases, lax regulations have technologies. These ins
been designed that have allowed titutions have superior
startups to offer personalized, economies of scale, however,
less expensive and easily they tend to focus on packaged
accessible services to their and generalized services for
clients. However, a large clients. Traditional financial
majority of ecosystems still do institutions initially treated
not have specific regulation, em FinTech developments as a
which prevents the progress of threat, but lately they
many projects that must be recognized that the best thing
governed by the imposed is to collaborate with them and
regulation [ 21 ] . make alliances that allow them
Financial clients represent to cover market niches that
the source of income for FinTech they, due to their size and cost
firms. The ecosystem's dominant structure, had not been able to
revenue comes from individual cover. Furthermore, these
customers, as well as small and alliances and collaborations
medium-sized businesses (SMEs). have enabled them to be at the
The majority of clients are frontier of knowledge and

21
 Fintech in the world: the digital revolution in finance has arrived in Mexico

technology [ 21 ] . deeper knowledge of the

Finally there are the Capital ecosystem. Finally, one of the
Funds and Accelerators, whose most valued assets in
main role in the ecosystem is to accelerators is the opportunity
support with resources, expe they provide to startups to
rience and best practices to all create a solid network of
startups Traditional financial contacts, because through these
programs gramas manage to
institutions initially treated FinTech
generate connections with key
ventures as a threat, but lately they actors of the entrepreneurial
recognized that the best thing is to ecosystem.
collaborate with them and make
alliances that allow them to cover
market niches that they, due to their
size and their cost structure had not
been able to cover.
FinTech. In the case of capital
funds, these turn out to be the
main fuel that drives scalable
businesses with growth potential
to carry out their idea. There
are mainly two types. The first
is angel investors, individuals
with certain financial solvency
who offer risk capital to
entrepreneurs. with those who do
not have any family or
friendship relationship. And the
second are venture capital
funds, which provide resources
to ventures in the growth and/or
expansion stage.
The accelerators, for their
part, dedicated themselves can
promote FinTech startups that
are beginning to enter the
business market. Its operation
is based on a program that
contains a series of calls with
a stipulated time period. During
this program, the accelerators
offer startups activities such
as mentoring, intensive
training, digital education and
tutoring, so that they obtain a

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 Bancomext

Industry segments and sub-segments

l The different business models of FinTech startups that

coexist in the industry share certain characteristics in the
products and/or services they offer, which allows them to be
grouped into segments. These segments, in turn, are divided into
sub-segments that highlight the specialization of said models. The
class fication into segments and sub-segments described below was
designed by Finnovista. These are eleven main segments that make it
possible to visualize the evolution of the ecosystem, the coverage
of needs, as well as the trends of the different Latin American
markets.

TABLE 1. Payments and remittances

PAYMENTS
AND
REMITTANC
ES
Mobile payments and wallets The business models of the
Mobile solutions for broadcast and administration traduction payments and remittance segment
of money. are the simplest com standing
International transfers and remittances with other FinTech products and
services. The companies that
Online solutions designed for sending money to companies
or people abroad offer them focus on payments that
can be made quickly and at a
Mobile Points of Sale (mPOS)
lower cost. The two most
Point of sale terminals for mobile phones (cell phones). important markets in the world of
Payment gateways and aggregators FinTech payments are: 1) Consumer
payments dor (retail) and 2)
Solutions for the acceptance, authorization and processing
of payments on digital platforms. Corporate payments. Payments
include mobile wallets, person-
Cryptocurrencies
to-person payments (P2P Lending),
Solutions that allow financial transactions to be carried out
overseas payments and
through crypto assets.
remittances, real-time payments,
and digital currency payments.
These services have improved the
consumer experience. Midores
looking for speed, convenience

23
 Fintech in the world: the digital revolution in finance has arrived in Mexico

and access to multiple channels.

The leaders in this model are
Google Wallet, Apple Pay, Smasung
Pay, Pay Pal and Venmo. In Latin
America we find important cases
that are already operating, such
as Kantox.

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 Bancomext

Balance sheet loans to businesses P2P loans for people and P2B for
TABLE 2. Loans

LOANS

businesses are another big trend

Platforms operated by an entity that directs ly provides
online loans to businesses.
in the ecosis FinTech theme that
allows consumers and businesses
Balance sheet loans to consumers
to lend and borrow from each
Platforms operated by an entity that directly provides online other without financial
loans to consumers
intermediaries involved. With
P2P loans to businesses their efficient structure, these
Platforms where people provide online loans to businesses. FinTech startups can offer low
interest rates and optimize the
P2P loans to consumers
lending process mos for both
Platforms where people provide online loans to parties to the transaction. Its
consumers/individuals
biggest differentiator compared
Invoice factoring and loans to traditional loans is that the
Online platforms where people or entities purchase invoices platforms do not get involved in
or accounts payable from other businesses or offer loans the transaction, since it is
backed by them.
simple They connect lenders and
borrowers by charging fees to
users. Some successful platforms
worldwide dial are Lending Club,
Prosper, SoFi, Zopa and
RateSetter. In Latin America we
find success stories such as the
Argentine P2P lending startup
Afluenta.

P2P and P2B lending allows

consumers and businesses to lend
and borrow from each other, without
financial intermediaries.

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

TABLE 3. Crowdfunding

CROWD
FUNDING

Crowdfunding models empower Kickstarter and Indiegogo.

networks of people to For donation crowdfunding
collaborate in the creation of there are GoFundMe and
products, ideas and collection. FirstGiving, and for the equity
tion of funds for altruistic or model the most famous are
capital purposes. Three AngelList, Early Shares,
participants intervene in these Crowdcube and Play Business a
mechanisms: the creator of the Mexican platform.
project, who can be an
individual, a company, SA or a
MSME that requires resources to
carry out its idea; funders or
investors willing to contribute
and receive something in return
for their contribution; and the
moderating platform that brings
them into contact. These
platforms allow funders to
access information about the
different initiatives and
opportunities presented by
entrepreneurs regarding their
products, services or projects.
There are three basic
crowdfunding models according to
the return given to those who
contribute: Reward Crowdfunding,
Donation Crowdfunding and Equity
Crowdfunding. Examples of
rewards crowdfunding are

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 Bancomext

Rewards in private companies.

Platforms through which people provide financial Real estate

resources to individuals, projects or companies in
exchange for products or non-monetary rewards. Platforms through which people finance or acquire
participation in real estate projects.
Donations

Platforms through which donors provide financial

resources to individuals, projects or companies with
Crowdfunding models empower
philanthropic motivations spades and without
expectations of a monetary or material return. networks of people to collaborate in
Capital creating products, ideas and raising
Platforms through which people acquire shareholdings
funds.

27
 Fintech in the world: the digital revolution in finance has arrived in Mexico

MANAGEMENT
TABLE 4. Personal Finance Management (PFM)

PERSONAL
FINANCE

Savings and financial FinTech startups

efficiency
for personal
Digital tools for consumers finance management
that make it easier to manage
savings and organize
exploit data,
expenses. cutting-edge
Debt management
technology and
sheer willpower to
Digital tools for consumers
that facilitate the
overcome the
management and traditional
restructuring of personal
confines of the
debts.
financial system.
Comparison platforms
They are
Online platforms that contrast experimenting with
different financial products
new business
and their characteristics.
models in an
Others
attempt to align
Other technological solutions their incentives
for the financial management
with those of
of individuals.
consumers. They
help users act
more intelligently
about the use of
their money.
The result is
that it has never
been easier to
save, spend,
invest and find
good interest
rates, in addition
to securing assets

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 Bancomext

and having and Credit Karma,

information for while in Latin
decision making. America in We
Some of these found startups
FinTechs that like Finerio,
stand out are: Fintonic or Übank
Qapital, Earnin among others.

FinTe
ch
startu
ps for
perso
nal
financ
e
mana
geme
nt
help
users
act
smart
er
about
the
use of
their
mone
y.

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Fintech in the world: the digital revolution in finance has arrived in Mexico

TABLE 5. Enterprise Finance Management (EFM)

MANAGEMENT
FINANCE
BUSINESS
The segment that set of new tools
brings together that allow these
FinTech companies businesses to
for business focus on their
finance management growth and their
has played a purposes, instead
crucial role in of getting bogged
the growth of down in financial
SMEs. These and accounting
startups are issues. Some
helping small success stories in
businesses in many Switzerland are
ways, from Bexio, Run my
innovative Accounts, Small
accounting Invoici. In the
software to United Kingdom,
financial Iowa and Market
management Invoici are
services, business famous. In Latin
valuation, and e- America we find
invoicing. It is a the startup Alegra

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 Bancomext

as a success story Electronic billing

[4] . Online platforms for the offer and

provision of invoice services.

Digital accounting

Online platforms for accounting

administration and tax
calculation.

Financial management and

business intelligence

Solutions for data protection and

analysis.

Collections

Digital solutions to facilitate or

manage the recovery of accounts
receivable from businesses.

Others

Other technological management

solutions.

Enterprise finance management FinTechs

have played a crucial role in the growth of
SMEs.

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

TABLE 6. Alternative scoring, identity and fraud

ALTERNATIVE
SCORE, IDENTITY
AND FRAUD
Security and Alternative scoring, identity
digital identity
and fraud is a segment that
Person verification and authentication solutions for access brings together all those
and authorization of financial transactions.
FinTech startups that offer
Fraud prevention and risk management solutions for the rification and
Solutions focused on fraud prevention and operational risk authentication of people, as
management for financial entities. well as measures developed for
Biometrics the prevention tion of frauds.
Among the most advanced services
Application of technology related to the physical or
behavioral traits of an individual to verify their identity. is the application of
technologies related to the
Alternative scoring
physical or behavioral traits of
Alternative solutions for measuring credit risk of people or an individual to verify their
companies.
identity. They also provide
tools for au financial
transaction transactions. These
are instruments that complement
financial or business services
to provide have security
measures and prevention of
embezzlement. Some examples in
the world are Aire in the United
Kingdom, Bonify in Germany,
Kredit Karma in the United
States, Secure Key in Canada,
and Connaizen in Singapore,
while in Latin America we find
EFL Lenddo as one of the notable
startups in this segment. .

Among the most advanced services

is the application of technologies
related to the physical or behavioral
traits of an individual to verify their

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 Bancomext

identity.

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

TABLE 7. Technologies for financial institutions

TECHNOLOGIES FOR

FINANCIAL
INSTITUTIONS
To succeed, banks Some examples of
need to pay more these companies
attention to new in Silicon Valley
FinTech startups are: Size Up,
that could be very Cash flower,
valuable partners. SnapCard, Kensho,
For whatever the and Elsen.
most important
financial service
of a bank, there
Its objective is to
are brilliant provide solutions to
FinTech companies services that banks
today innovating in
cannot cover due to
various areas. Its
objective is to cost or scope.
provide solutions Therefore, all banks
to services that
must make their
banks cannot cover
due to cost or executives and
scope. Therefore, innovation teams
all banks must make
aware of these
their executives
and innovation FinTech
teams aware of companies.
these FinTech
companies and find
in them the
opportunity to
collaborate or
connect them to
their value chain.

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 Bancomext

Identity and know-your-customer

(KYC) solutions

Solutions for understanding clients

in their relationship with financial
service providers.

Smart contracts

Smart protocol that facilitates,

secures, reinforces and executes
contracts/agreements.

Others

Other technological solutions that

support the development of
financial solutions for institutions.

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

TABLE 8. Insurance TABLE 9. Trading and capital markets

INSURANC TRADING
E AND MARKETS
OF CAPITAL

The insurance options characteristics.

within what is known as

Insurtech offered by
Startups work to directly
startups work to
directly empower the empower relationships
relationships between between the insurer and
the insurer and its
its clients.
clients. They use data
analysis to calculate
risk, as well as
generate a pool of
potential clients to
whom they can offer
services. They also
speed up billing work
and have been well
received by traditional
insurance companies.
Examples are Censio,
CoverFox, The Zebra,
Sureify Labs and
Ladder.

InsurTech

All types of technological

entrepreneurship apply exclusively
insurance.

Comparison platforms

Online platforms that contrast different

pros insurance pipelines and their

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 Bancomext

Capital markets which the added value

business models cover a of reducing barriers
wide spectrum of areas, and costs to per
such as investments, physical companies and
currencies, stock SMEs. Some examples are
trading, risk Robinhood, eToro,
management, as well as Magna, eStimize and
some research. One of Xoom, and in Latin
the most promising America we find Kuspit.
areas Another aspect of
this model is stock FX Solutions

trading, which connects Solutions for the purchase and/or sale

investors with of foreign currencies for people and
companies.
negotiators to place
orders, sell Solutions for the stock market

commodities and shares, Solutions for buying and selling shares

and monitor risk in and debt.

real time. Another Others

relevant area is that
Other technological solutions to
of foreign exchange in facilitate and execute transactions in
other asset classes.

37
TABLE 10. Asset Management TABLE 11. Digital banking

MANAGEMENT DIGITAL BANKING

PATRIMONIAL

One of the most popular FinTech Digital Banking FinTechs are

models in the United States financial entities with their own
includes wealth management banking license or using that of
applications. These are robot a third party. Digital banking
advisors that provide financial solutions are appreciated for
advice at a much lower cost than their con convenience and time
traditional services. Through the saving. Its acceptance in Asian
use of algorithms they suggest a countries has been very relevant,
mix of assets and investment while in Latin America the
alternatives based on client segment is barely consolidating.
preferences and characteristics. Some examples are WeBank, CBD
Some examples of these companies Now, Bank Mobile, N26, Monzo and
are Betterment, Walthfront, Orange Bank. In Latin America,
Motif, and Folio. startups such as Nubank in Brazil
and Flink in Mexico have gained
Digital wealth management importance.
Online platforms for the offer and provision of wealth
management services. Newly created financial entities (with their own banking
license or using that of a third party) with multiple
Robot advisors financial products and whose distribution is 100% digital.

Automated solutions for patrimonial management monial

through algorithms or artificial intelligence.
Digital Banking FinTechs are financial
entities with their own banking license
Wealth management applications
or using that of a third party. Digital
suggest a mix of assets and
banking solutions are appreciated for
investment alternatives based on
their convenience and time savings.
client preferences and characteristics.

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 Bancomext

In parallel to the FinTech

ecosystem, other ecosystems have EXPORTTECH
been developed that rely on = EXPORTS + TECHNOLOGY

technology to improve their Term innovated by Bancomext for

services and products. Without technological solutions that
being strict specifically facilitate the export processes
financial solutions, they are of SMEs in Mexico.
closely linked to this industry
and therefore to the Fintech
sector. The incorporation of
neologisms into our language has Technologies used in FinTech

AND
never been so accelerated,
especially thanks to new 2019
technologies. Some examples are: promises to
be the year
we see the culmination of some
REGTECH key technologies, from the
= REGULATION + TECHNOLOGY Internet Artificial Intelligence
Startups that use technology to (AI) and Blockchain, to Design
improve internal processes with Thinking and The Cloud. In a
the objective objective of context where new Since several
optimizing efficiency and technologies emerge, are
complying with the regulatory implemented and become dominant
framework, especially with in the blink of an eye, it is
financial and insurance important to mention the five
companies. trends that currently impact the
FinTech industry globally [ 36 ] :

PROPTECH
= PROPERTY + TECHNOLOGY

It is a sector of activity made

up of those startups that combine
a technological component with
the contribution of value to the
real estate world.

i. Artificial Intelligence and Machine

learning
and Artificial Intelligence)

39
Refers to computer programming to
perform operations that are
considered dern of human
intelligence, such as self-
learning. In finance technology
is helping to detect and fight
fraud before it can be detected
by humans. It also helps
compliance with regulations.
Chatbots built with AI are capable
of answering customer questions
ii. APIs – Application Programming
with precision and speed without
Interface
human intervention. In wealth
management, AI can stress test
It is a set of rules (codes) and
market scenarios and eliminate
espe cifications that
biases in investment decisions
applications can follow to
Zion. We are just scratching the
communicate with each other. They
surface of artificial
serve as an interface between
intelligence, learning what we
different programs, just as
can do with it inside and outside
happens with the interface that
the FinTech industry [ 36 ] .
facilitates human-software
Being one of the fastest
interaction. These apply tions
growing FinTech Startups in the
are crucial to addressing the
United States, ZestFinance
economic challenges facing the
applies AI-based credit
FinTech industry. By using APIs,
decisioning technology to its
these dynamics Few companies are
business model to help lenders
able to innovate with the agility
increase revenue, re reduce risk
and speed that larger traditional
and ensure compliance. In 2017,
banks and financial institutions
the company launched the
have not been able to do [36] .
automated machine learning (ZAML)
platform, which quickly and
By using APIs, startups are able to
accurately identifies good
borrowers by analyzing innovate with the agility and speed
traditional and non-traditional that larger traditional banks and
credit variables.
financial institutions have not been
able to do.

APIs are the answer to the

question of how FinTech startups

a A chatbot is a computer program with which it is

possible to maintain a conversation, whether we want to
ask it for some type of information or to carry out an
action.

40
 Bancomext

are able to build products faster

these days. Most FinTech
companies now have their products
on cloud services so they can
access API data like a local
database. Some examples of APIs
that are working well in the
world are:
• Baintree: This API allows
users Users can seamlessly
sign up from within the apps
and get instant approvals so
merchants can easily receive
credentials on a user's
behalf. rio, basically
everything needed to process a
transaction.
• CardConnect – Enables the
secure acceptance of a wide
range of credit, debit and
other payments. Instead of
charging a high fee,
CardConnect uses the
“interchange plus” price as
processing costs. The API
offers functionalities such as
overnight financing,
proprietary tokenization,
recurring billing, online
invoice submission, host
payment page. data and fraud
protection.
• Dwolla – Provides an
interface to integrate the
Dwolla payments platform into
a software application. Dwolla
is a payment processor that
provides a web-based platform
that allows users to send,
receive and request funds from
any other user.

41
 Fintech in the world: the digital revolution in finance has arrived in Mexico

iii. Blockchain uses it tion of Blockchain

will allow for greater
Also known as Blockchain, it is a precision of trade and a
technology that allows the shorter process.
transfer of digital data with 3. One of the most promising
very sophisticated encryption and applications The advantages of
in a completely secure manner. Blockchain is the Smart
It's like the accounting book Contract. It can execute
bility of a company where all business transactions and
inflows and outflows of money are agreements automatically. It
recorded; In this case it is a also imposes the obligations
book of digital events. And the of all parties to a contract,
most important thing is that it without the additional expense
does not require a centralized of an intermediary.
intermediary to certify the 4. When identity management is
information [ 36 ] . carried out with Blockchain,
For the FinTech industry, it users Users will be able to
contributes security and choose how to identify
transparency in a world full of themselves and to whom to give
uncertainty and threats of fraud. this information. They will
There are five applications of still have to register their
Blockchain in the FinTech sector [ identity on the block, but
12 ] : after that, they can reuse
1. Value transfer has always that ID in many other
been an expensive and time- services.
consuming process. This is 5. Blockchain offers many
particularly true for cross- benefits, including
border payments. Blockchain is transparency and transaction
capable of speeding up and traceability. This will help
simplifying this process, as banks and insurers create a
well as reducing costs more engaging loyalty and
significantly. rewards program that
2. Stock trading will soon be accommodates performance
impacted by this technology.

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 Bancomext

management and improves b Creature composed of organic and disorganized

elements cybernetic positives generally with the intention of
engagement.
improving the capabilities of the organic part through the
use of technology.
For the FinTech industry, it provides
trust and transparency in a world full v. Quantum Computing
of uncertainty and fraud threats.
A traditional computer system is
Over the next few years, we expect to based on bits that are zeros and
see these interfaces appear in more ones. The in Quantum formatting
uses qubits , which allow a
and more places and be perfected to
computer to go beyond simply two
such a degree that we reach states to soul. dine on an
“Cyborgs.” enormous amount of information
while using less energy. Com
Quantum computers will not
iv. Human Digital Interfaces
replace traditional computers,
but rather will be able to solve
It is the medium through which
computationally difficult
humans hands we interact with
problems, such as maximizing
computers, such as using our
investment returns based on a
voice to give commands instead of
given risk profile. In addition
touching the screen, passwords
to finding quick answers and
titled by biometric analyzes of
achieving the precision of
fingers, retinas or faces, or
artificial intelligence. These
technologies measuring our
computers could even make
emotional state from our
technology seem intuitive.
interactions with mobile devices.
Technology to detect fraud or
Over the next few years, we
money laundering is an area well
expect to see these interfaces
suited for quantum computing
appear in more and more places
[ 36 ] .
and be perfected to such a degree
No matter how fast and
that we reach “Cyborgs b ” [ 36 ] .
powerful digital computers may
For example, rapidly adopting
become, some problems in finance
companies like Amazon Alexa and
remain that cannot be solved.
Google Home are using voice-
Some examples of these are
activated “digital assistants” to
dynamic optimization portfolio
schedule meetings, check the
analysis, clustering, scenario
weather, and increasingly,
analysis and the Pricing option
complete personal finance
for complex derivatives. For
transactions. Demand for voice-
problems like these, Quantum
activated mobile banking among
Computing (QC) offers the promise
consumers has grown
of solving them in a matter of
significantly, so we will soon be
days, rather than years.
seeing the use of this technology
in new technology finance
companies.

43
Bancomext

44
 TABLE 12. Technologies used in FinTech
FinTech is an industry that
continues to be being at the
01 Big Data & Analytics Big
forefront of innovation. Data and Analytics
Technology that would take
Study of a broad set of different types of data
decades to design, test and sets to discover hidden patterns, correlations,
implement at traditional market trends, consumer preferences and other
valuable information.
financial institutions, FinTech
startups apply in the real world
in a fraction of the time. While
security risks remain, the Machine Learning &
02
winners are not We as consumers Artificial Intelligence
Machine Learning and
who are already experiencing the
Artificial Intelligence
benefit, convenience and
functionality in our Artificial Intelligence refers to the fields of
computing dedicated to solving cognitive
experiences. banking and problems generally associated with human
financial companies, thanks to intelligence, such as learning, problem
solving and pattern recognition. Machine
these trends in technology in learning is the science through which
the FinTech industry. computers learn and act like human
beings, improving their learning over time
However, the technologies
autonomously once they access data and
mentioned Nothing is still in information through observation and
widespread use or exploitation interactions with the real world.

due to the initial stage of TO

knowledge in which we find

ourselves. Therefore, based on
those that exist today in the
Latin American Fintech
ecosystem, Finnovista developed
a classification that is more in
line with reality. This 03
Mobile & Apps
classification disaggregates Mobile and Apps

those technologies used and Software application developed

tested by FinTech startups in specifically for use on small,
wireless devices, such as
Latin America, and determines 10 smartphones and tablets, rather
main technologies. Its use is than computers
diverse in the mentioned
segments. Below are presented so
to consider them in the analysis
of the FinTech industry in
Mexico.
 Bancomext

05

Cryptocurrencies & Blockchain / Cryptocurrencies and Block Chain

Blockchain is a distributed ledger technology that forms a “chain of blocks.” Each block
has information and data that is packaged and verified. These blocks are validated and
become part of a chain of transactions and information from previous blocks. These
blocks of transactions are permanently recorded te in the distributed record that is the
04
Blockchain. Cryptocurrencies are seen as a tool or resource in the Blockchain network.
Includes any relationship with buying, selling, investing, trading or any other monetary
Sharing Economy
aspect dealing with native Blockchain tokens or subtokens.
Collaborative Economy

Economic system
through which
the assets or services
Open Platforms & APIs / Open Platforms and APIs
Services are provided 06
between people, either
The opening of APIs (Application Programming Interface
free of charge or for a fee,
ce) is an application programming interface that allows the
mainly through digital
owner of a network service to give universal access to that
media and/or the Internet.
service to consumers, such as technology developers or
financial entities.

07 Cloud Computing Cloud

Computing

Providing IT services – servers,

storage, databases, networking,
software, analytics, intelligence 08
and more – over the Internet
(“the cloud”) to deliver rapid
Internet of Things
innovation, flexible resources internet of things
and economies of scale.

System of devices
interrelated through the
Internet, mechanical and
digital machines, objects,
animals or people
provided with unique
identifiers (UIDs) and the
ability to transmit
information tion on a
network without the need
for ration between
humans or between
humans and a computer.
 Fintech in the world: the digital revolution in finance has arrived in Mexico

FinTech Basics

Before introducing the reader to the

current statistics
L% of FinTech in Mexico, as well as future
trends, it is important to clarify all the
concepts used in the language of
Technological Finance. To with Next, the most
important basic concepts are listed.
Tool used to measure patterns and trends in
Analytics
data.

Legislation that fights against the

Anti Money Laundering (AML laundering of funds from illegal activities,
- Anti Money Laundering) which in turn can be used for terrorist or
criminal activities.
Application programming interface that allows
Application
Programming the owner of a network service to provide
Interface (API) universal access to that service to
consumers, such as technology developers or
financial institutions.
Exchange of products, services or information
B2B
Business to between companies, instead of between
Business companies and consumers.
Electronic commerce model that combines
B2B2C
Business-to-Business with Business-to-
Business to Business to
Consumer, giving rise to a complete exchange
Consumer
or transaction. It is an e-commerce model
that generates a symbiotic exchange service
and a product delivery gateway.

B2C Transactions carried out directly between the

Business to company and consumers, the end users of its
Consumer
products or services.

Database Program that allows you to organize

information efficiently on a platform.

Benchmark Process by which information is collected and

obtained Create new ideas by comparing
aspects of your company with the leaders or
strongest competitors in the market.

Voluminous amounts of structured or

Big Data
unstructured data structured data that
organizations can mine and analyze for
business benefits.

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Bancomext

49
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Electronic wallet Software that allows users to make electronic

payments unique, buy and store
cryptocurrencies online.
Virtual currency that can be digitally
Bitcoi
n exchanged between people through
cryptographic techniques to validate
transactions and make changes to a
distributed ledger.
A particular structure of distributed network
Blockchai
n technology that links together blocks of
transactions, providing a complete history of
all assets and instructions carried out,
using complex cryptography.

Bootstra Person or group of people who start a

p business initiative with a minimum amount of
investment or ca seed pital.

Services offered through Cloud Computing,

Cloud
Computing that is, a model to allow ubiquitous,
convenient and on-demand network access to a
shared group of shared computing resources
(e.g. networks, servers, storage,
applications and services) that can be easily
provided and released with minimal management
effort.

Cognitive Computing Simulation of human thought and reasoning

processes in a computerized model.

Smart Contracts Computer transaction protocol that executes

the terms of a contract.

Cryptocurren A particular type of virtual currency that

cy operates through cryptography.

Financing system for a project or company

Crowdfunding
that flows small amounts of money belonging
to a large number of people. It is generally
carried out through Internet-based registries
that facilitate the collection of money for
the borrower (loan) and issuer (equity).

Data Information used to analyze or evaluate a

possible result or trend.

Event for developers where a specific problem

Hackathon is raised to be solved in an uninterrupted
manner.

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

Hosting Company that provides physical infrastructure

for a website, applications or information.

ICO Process by which financing is raised for a

Initial Coin new company financed in cryptocurrencies and
Offering
contributors receive tokens in exchange.

Incubator Company that helps new companies and startups

develop develop by offering services such as
management training or office spaces.

The application of better ideas through more

Innovation
effective processes, services, technologies
or business models. It is not limited to the
implementation of new technologies.
InsurTech refers to the union between
InsurTech
Insurance and Technology, it defines the
sector that encompasses: traditional
insurance companies that transform to adapt
to the new technological context, technology
companies, as well as startups that take
advantage of technological advances to offer
products.
Broad and that
concept innovative services
encompasses in the
the ability of
Artificial
machines to carry out tasks in an
Intelligence AI
“intelligent” way.
Network of everyday objects connected through
Internet of Things
the Internet capable of collecting and
IoT - Internet of
exchanging information through integrated
Things
sensors.
Set of standards that entities must comply
KYC
Know Your with gives to the identity of their clients
Customer and the legality of their funds

Machine An application of Artificial Intelligence

learning through which we give machines access to data
and let them learn on their own.

An asset that operates as a currency but is

Virtual
currency not issued or backed by a central bank or
public authority, nor does it have the status
of a monetary unit in any jurisdiction.
Individuals who were born using technologies
Digital
natives such as the Internet, computers or mobile
devices.

Virtual infrastructure that retains an

Cloud
unlimited amount of data and information.

52
 Bancomext

P2P Those actions that occur between peers,

Peer 2 Peer through a network of computers without fixed
and conforming clients or servers. mada by a
series of nodes without hierarchy
Payment Service provider that facilitates card
gateway transactions for online businesses.

Loans between individuals and companies

P2B Peer-to-business
consist of obtaining financing through loans
loans
or credits normally provided to SMEs by small
investors organized through specific web
portals.

High Speed Network Networks that transfer data in a millisecond.

High Speed Network

Applications that combine digital interfaces

Robo-advisor
and algorithms, sometimes also machine
learning, to offer services such as automated
financial recommendations or commercial
intermediation to manage their clients'
portfolio. These advisors can be independent
companies or platforms or applications
developed within a financial institution.
Regulatory sandboxes offer fi Financial
Regulatory sandbox
institutions and non-financial companies are
controlled spaces where they can test
innovative Fintech solutions with the support
of an authority for a limited period of time,
allowing them to validate and test their
business model in a safe environment.

Softwares-as-a- Software license and delivery model through

Service which software is licensed through a
SaaS
subscription and managed centrally.

Great company in its early stage; Unlike an

Startup
SME, the Startup is based on a business that
will be scalable more quickly and easily,
making use of digital technologies.
Distributed ledgers use independent
DLT Distributed computers teeth (known as nodes) to record,
Ledger Technology - share and synchronize transactions in their
Distributed Ledger respective electronic records (rather than
Technology storing the information centrally as in a
traditional registry).

53
CHAPTER 3

FinTech in the
world
 Bancomext

FinTech helps individuals and organizations create new avenues for

empowerment and provides opportunities for all. As the Special
Representative on Inclusive Financing for Development, Queen
Máxima of the Netherlands, said: “When financial services are
affordable, effective and secure—savings, insurance, payments,
credit and more—they can play a transformative role in fostering
equitable growth, as well as the achievement of vital objectives such
as poverty reduction, job creation, gender equality and food
security.”

d
he billion adults, more world. fill within relevant
than half of the world's regulations and achieve the goal
working adults, remain of inclusion.
excluded from formal A great example of the
financial services them [37] . transformative power of FinTech
These populations are often those is the Kenyan mobile money
who are already marginalized, service, M-pesa, which uses
such as women, low-income mobile devices as an electronic
individuals, and those who are wallet, converting I place the
hard to reach. Being left out of SIM card in a bank account with
the formal economy means that virtual money, so that users can
these populations are denied are pay rent or basic services and
such as the extension of savings, send money to other people
credit, insurance and payment through a text message. An impact
services. Fortunately, FinTech is study revealed that mobile money
helping to reach and empower provided by M-pesa reached
women, as well as other 194,000 households, representing
marginalized populations, giving 2% of the Kenyan population out
them entry into the formal of poverty [ 22 ] . Connecting
economy and security in their populations to safe, mobile and
transactions. For this reason, efficient financial services has
organizations such as the United the potential to address many of
Nations, the World Economic the sustainable development
Forum, the OECD, among others, goals, including ending hunger,
are interested in the development benefiting health and well-being,
of FinTech ecosystems around the and reducing inequality.

55
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Now it's time to take a look at Philip Hammond at the

some of the best examples of International Fintech Conference
FinTech in the world, that is, in March 2018, the plan is for
developed economies. countries this to happen in half the time,
that have been pioneers in the that is, every half hour. The
development of the Fintech British Government plans to
ecosystem, as well as emerging create a group of cryptocurrency
countries where the adoption of experts to streamline regulatory
Fintech is being massive and used issues so that small technology
as an integration mechanism in companies can adapt quickly. For
the financial system for evil. It some years now, these companies
is vitally important to observe have become one of the driving
the dynamics that occur in these forces of growth mainly in
ecosystems. pioneering topics London, although it has been
where the emergence of these spreading to other cities in the
digital innovations is being country.
adopted in order to identify best FinTech is a challenge to the way we
practices as an example for
deliver and access financial services
emerging ecosystems people who
have greater potential for in the UK. It helps consumers make
inclusion, such as those from more informed decisions and
Latin America.
increases competition in our financial
London services industry. We are committed
to supporting FinTech to ensure we
maintain our global leadership
position.

Stephen Barclay
Economic Secretary to the United Kingdom Treasury

The City of London's role as

the heart of global financial
markets has been established for
decades and remains intact
despite fierce competition in
international and globalization.
The recent March 18 edition of

c
the Global Financial Centers
Index known as Think Tank Z/Yen
every hour a new star is
once again placed London in first
created tup FinTech in
place, just ahead of New York.
the United Kingdom and,
The selection of the index is
according to the message given by

56
 Bancomext

based on factors such as business public-private fund for

environment, human capital, investment. that will maintain
infrastructure, financial sector the city as the “Global Capital
development and reputation. of FinTech”. But it is not enough
London maintains its influence as for London to have the impeccable
a financial center It is an ingredients that will make it the
international market and will global center of FinTech. The
continue to do so in the future city also has to have the success
thanks to the fact that it is stories to back up its acclaim
also today the city with a hotbed and enthusiasm. Therefore, five
of FinTech startups incubating of the twelve most successful,
and/or accelerating. influential and promising FinTech
The industry as a whole has companies residing in London are
generated 60 thousand jobs since reviewed below [ 19 ] .
its inception and the government
TRANSFERWISE
plans to continue supporting its
creation. foundation and transferwise.com
development. It is the biggest Easily the best-known FinTech
bet that a developed country firm among London pioneers,
makes on something so innovative. TransferWise was founded in
During 2017, the FinTech sector London in 2011 by two Estonian
in the United Kingdom attracted entrepreneurs Kristo Käärmann and
venture capital investments of Taavet Hinrikus. It is dedicated
800 million pounds through 224 to the person-to-person currency
operations. One of the British exchange and transfer service.
companies The only company that Last year it started making
raised around 200 million pounds profits. The company has more
is TransferWise, which is among than 2 million clients, offers
the 20 largest in the world [19] . 750 currency routes and moves
more than a billion dollars a
month [ 19 ] .
You basically have Silicon Valley, Wall
Street, and Washington, DC, and FUNDING CIRCLE

fundingcircle.com
everything, in one place.
Another London FinTech unicorn is
Fun ding Circle. It is a debt
Eileen Burbidge
Venture capital investor in FinTech companies crowdfunding platform whose
business model is based on
The synergy achieved in the providing SMEs that are outside
city with technology, capital the requirements. traditional
investments and politics has been bank lending methods, access to
used to consolidate London as a capital and lenders. Founded in
“FinTech Bridge” that even led 2010, it is ready to make an
the government to create a “Initial Public Offering” or IPO

57
 Fintech in the world: the digital revolution in finance has arrived in Mexico

in 2018. This means that it will monzo.com

become a public company and Monzo is the first FinTech
market analysts expect a startup to represent poses a
valuation approaching £2 billion challenge to traditional banks as
[19] .
it managed to obtain a full
ALGOMI banking license. It has managed
to attract 500,000 customers in
algomi.com
the 3 years since its launch in
Having won several awards and
2015. Deposits of up to £85,000
recognition industry knowledge,
are now covered by financial
Algomi covers the buying and
services compensation schemes and
selling of products for the
this traction is likely to
trading of income securities. The
increase. Debit cards and
software developed by its
overdraft services mean that a
creators makes the complex
Monzo account can replace a
commercial landscape easily you
traditional bank [19] .
navigable. This is undoubtedly
the type of disruptive model that It is necessary to achieve regulation
London FinTech startups are
bringing to financial services,
that, on the one hand, promotes
not following the rules to the innovation and competitiveness, and
letter and finding new ways of at the same time guarantees a safe
doing things [ 19 ] .
and transparent market for consumers
BLOCKCHAIN
and investors.
blockchain.com
Blockchain was created in 2011 According to the consulting firm
and its corporate offices are Deloitte, there are four key
located in London. It has raised factors that contribute to the
capital for 70 million dollars success of a Fintech hub: talent,
from one of the most prestigious capital, demand, and policies and
VCs (Venture Capitalists) in regulation. In this sense, London
Silicon Valley, today becoming has been a pioneer in achieving
one of the largest Bitcoin progress in all areas, which has
wallets in the United Kingdom. positioned it as one of the main
The company describes itself as technological finance hubs in the
the global software platform for world.
digital assets and supports The ability to attract, develop
nearly 23 million cryptocurrency and retain financial,
wallets across 100 million technological and entrepreneurial
transactions. It also has a talent is crucial to achieving
payment solution that accepts sustained success on a global
Bitcoins [ 19 ] . scale. King The United Kingdom
has developed different policies
MONZO

58
 Bancomext

and programs to improve access to Fintech sector led investments in

talent in the Fintech field, such 2017, raising £1.34 billion in
as the UK Tech Nation Visa venture capital with significant
initiative, which grants visas to investments such as those
attract the best technological obtained by TransferWise (£211M),
talent around the world and work Funding Circle (£81.9M) and Monzo
in the technology sector. gic and (£71M) [ 8 ] .
digital of the country. To date, Demand, as in any other
more than 600 visas have been industry, fuels the supply of
granted for people from more than products and services and
50 different countries [8] . guarantees their stability. This
Programs that support can come from consumers (for B2C
entrepreneurs to launch or scale offers) and/or from corporates
their projects are also very (for B2B offers). In this sense,
important, such as the London stands out for the
Startupbootcamp FinTech presence of important financial
acceleration program, a 6-month entities that have decided to
program that provides financial settle in the English city to
and mentoring support to startups establish their innovation
together with different corporate centers and be able to develop
entities; o Seedcamp, the venture Fintech solutions, such as
capital accelerator that offers Barclays, which in 2017 opened
seed financing for innovative the new headquarters of its
startups in Europe. innovation center, Rise London, a
Access to capital is essential coworking space that hosts more
to develop and scale than 40 Fintech startups.
entrepreneurial ideas, therefore Finally, political support and
for an ecosystem to be stable in presentation nce of adequate
the long term it must have a regulation are essential cials.
variety of financing avenues for It is necessary to achieve
entrepreneurs and the different regulation that, on the one hand,
stages that a startup goes promotes innovation and
through. In this sense, London is competitiveness, and at the same
positioned as one of the most time guarantees a safe and
attractive cities to raise transparent market for consumers
capital, since according to and investors. The United Kingdom
information published by has been one of the pioneers in
PitchBook, venture capital mate regulatory body, mainly
investment in the technology through the Financial Conduct
sector in the United Kingdom Authority, which has developed
reached a record figure in 2017, initiatives such as Pro ject
attracting 2.99 billion pounds, Innovate (2014), a project that,
almost double the amount invested among other things, developed one
in 2016 [8] . Specifically, the of the first regulatory

59
 Fintech in the world: the digital revolution in finance has arrived in Mexico

“sandboxes”, a safe space where European Union (Mavadiya, 2017).

Fintech companies can test and It is a region that has always
test products, services and invested in innovation and that
business models in a live and in recent years has made a
supervised environment but relevant effort in matters of
without having to take advantage regulation and collaboration. In
of to the strict regulations of 2016, the Monetary Authority of
the traditional sector, which Singapore (MAS) announced its
allows the advancement of intentions to merge and sim
businesses in initial stages clarify the legal issues related
under a permissive but controlled to currency exchange, remittances
environment. and payments, for which a single
regulation was determined that
The United Kingdom has been one of covered all issues. By far, it
the pioneers in regulatory matters, was an initiative ahead of its
time.
mainly through the Financial Conduct
What politically makes the
Authority, which has developed country fertile ground for
initiatives such as Project Innovate FinTech growth is its strong
public policy, effective tax
(2014), a project that, among other
incentives and a series of
things, developed one of the first initiatives. government
regulatory “sandboxes.” initiatives supporting the
industry. Furthermore, the large
Singapore number of talents with financial
experience and the availability
of capital for early-stage
investment make Singapore the
best market for establishing
FinTech startups. Added to this,
Singapore's per capita gross
domestic product (US$52,960),
world-class infrastructure with
excellent Internet access, ultra-
high-speed fiber running
throughout the nation, and
penetration

Yes e thinks that

Singapore
could become
become the global center of
Fintech, especially now that the
United Kingdom has left the

60
 Bancomext

GRAPH 1. Share by segment in the FinTech market in Singapore

26.8 % 17.9 % 16.3 % 9.8 %

Payments and Asset Management Others Loans

remittances

8.10 % 7.3 % 7.3 % 6.5 %

Data and analytics Infrastructure and software Cryptocurrencies InsurTech

companies

tion of mobile subscription, make The main FinTech sectors in

this Asian territory comply with Singapore are payments and
more than 100% of the key factors remittances , crowdfunding, wealth
for the growth of FinTech [ 23 ] .
management, lending and insurtech.
During 2017, this sector
received the largest amount of dfunding, wealth management,
funds as investment, reaching lending and insurtech. In the
US$229.10 million [ 34 ] , even second quarter of 2017, the
though most of this investment payments and remittances sector
throughout Asia decreased. The had 26.8% of the FinTech market,
financing landscape in the through 33 active startups. In
country comes largely from angel second place was wealth
investors, venture capital (VC), management with 17.9% of the
corporate business divisions and market [ 34 ] .
government entities. Some of the Some of the most important
key investors include 500 online payment providers in this
Startups, Golden Gate Ventures, country are:
Sequoia Capital, Sin gTel INNOV8,
MC PAYMENT
and government entities such as
GIC and Temasek. During the last mcpayment.com
capital round, two of the ten The first unified payments
most important transactions were platform in Asia Pacific,
the purchase of GoSwiff by offering a diversity of
Paynear Solutions for US$100 comprehensive solutions across
million, and the startup the entire value chain for
Smartkarma, which raised US$13.5 commercial transactions since
million in its B round [ 34 ] . 2005. Facilitates the collection

61
 Fintech in the world: the digital revolution in finance has arrived in Mexico

of payments through across A free solution that unifies

different platforms, from cash services billing and payment
payments to cryptocurrency processes, generating an easier,
payments. safer and more convenient
consumer experience.
PAYSEC
paysec.com Of the companies that offer
A robust, secure and efficient wealth management services are:
payment processor that connects
CANOPY
consumers with merchants and
banking gateways rias using a canopy.cloud
series of providers and payment It offers aggregation solutions,
methods just through an API portfolio analytics and reporting
integration. solutions for financial
institutions and wealth
YOLOLITE management professionals.
yourcanvas.co
SMARTKARMA
A digital banking service in a
smartkarma.com
mobile application designed for
Global asset management solutions
families that includes a series
through a digital Marketplace
of prepaid Visa cards, so they
that offers the possibility of
can use and transact without
investing in Asian markets.
having to access a bank.
TRADERWAVE
PAYSWIFF
traderwave.com
payswiff.com
Develops and offers an intuitive
A leader in mobile commerce, it
application that allows investors
offers integrated payment
to pre-select, analyze and
gateways and mobile applications
monitor transactions from any
for businesses to accept online
computer with internet access.
payments.
BAMBOO
SMARTPESA
bamboo.life
www.smartpesa.com
A robo-advisor that offers a
An omnichannel payment provider
solution to financial and
and solution banking services
consumer companies the ability to
that, through the incorporation
integrate and benefit from
of a Mobile Point of Sale (mPOs)
digital transformation in wealth
and payments with and without
management nial through its
cards, aim to solve the problem
investment algorithm.
of the last mile in emerging
markets. STASHAWAY

BILLPAY
www.stashaway.sg
The intelligent asset management
www.billpay.sg
platform monial that allows you

62
 Bancomext

to create different savings and Other government initiatives

investment plans according to the include the following:
consumer's objectives. • Development of sandboxes
that serve to enable
GOINVEST
institutions to finance cies
goinvest.com.sg can test the viability of
An automated and digital their financial technology
investment advisory solution that products and services in a
manages investments versions, cost-effective controlled
offers a specific portfolio based environment and within a
on the client's risk tolerance, defined space and duration.
investment horizon and funds to • Looking Glass at MAS is a
invest. silver way for the FinTech
community to connect, collaborate
The existing regulations
and co-create with each other.
governing FinTech services in
Additionally, MAS committed
Singapore include, among others:
US$225 million to the development
• The banking law
of Fin-Tech projects and signed
• The law of securities and
several cooperation agreements
futures
with governments and institutes
• insurance law
from various countries to provide
• The law of business trusts
information on FinTech trends and
• The law of financial
topics [ 34 ] . Some of these
companies
include institutions in the
The Monetary Authority of
United Kingdom, United States
Singapore (MAS) is the primary
two, Latin America, South Korea,
regulatory authority overseeing
Australia, Thailand, Hong Kong,
FinTech companies in the country.
and institutions such as the
MAS has been instrumental in
Massachusetts Institute of
establishing Singapore as a
Technology (MIT).
strong economic competitor in the
Located in the heart of Asia,
global FinTech industry. In 2017,
Singapore offers FinTech startups
the Central Bank launched a
possibilities for exponential
series of initiatives to boost
growth in the region. The country
the sector and connect startups
acts as a gateway for FinTech
with potential investors and
companies to explore emerging
partners. Some of them include
Asian economies that have much
the creation of a new FinTech
less mature financial markets and
innovation center called 80RR, a
are on the verge of a digital
partnership with the Singapore
revolution. Through Singapore, a
Banks Association on
FinTech company can access a
cybersecurity, and the
unique market size of more than
development of a platform cross-
625 million people in the region,
border way to finance trade using
larger than that of the European
Blockchain.
Union (504 million) and the

63
 Fintech in the world: the digital revolution in finance has arrived in Mexico

United States (319 million) [ 34 ] . low in young people between 18

and 24 years old, when compared
to people between 45 and 54 years
The Monetary Authority of Singapore old, mainly te because we are
(MAS) is the primary regulatory talking about a population that
authority overseeing FinTech is unemployed [ 14 ] .
Similarly to Singapore, India
companies in the country. has It has a government focused
MAS has been instrumental in on sustaining and accelerating
establishing Singapore as a strong this ecosystem. In general,
strong and proactive public
economic competitor in the global
policies are perceived wars whose
FinTech industry. purpose is to achieve financial
inclusion. Some of these policies
India
are:
1. Through the initiative known
as India Stack, the government
provides a technological
framework for startups res
that allows the accelerated
growth of startups.
2. The Startup India Program
launched by the central
government considers the
simplification of regulatory
processes, taxes, exemptions,

Q In India, the use of new patent reforms tes, mentoring,

financial technologies opportunities and increased
has generated lized among funding from the government
[ 25 ] .
the population in such a way that
it ranks second in the adoption 3. Jan Dhan Yojana is another
index designed by EY (52%), only initiative known as the
behind China (69%) [ 14 ] . More world's largest financial
than half of the consumer sample inclusion programme,
used to measure the adoption rate facilitating the creation of
stated that they had used a bank accounts for a
technological financial product significant portion of the
more than twice in the last 6 unbanked population.
months. The users are young 4. Aadhaar Adoption enables
people between 25 and 34 years biometric authentication
old, as is the case in most generated by the app ture of
ecosystems. However, unlike other bank accounts through the Web,
economies in the world, the significantly reducing costs.
adoption of these technologies is 5. The National Payments
Council of India's initiatives

64
 Bancomext

are focused on leveraging the billion dollars by 2020 [25] .

use of mobile phones to reach Mobile payment solutions (purses
more and more people on or wallets), as well as P2P
technological finance issues. applications and mobile points of
The user base by 2020 is sale, are adopted two easily by
expected to reach 500 million users in this country.
users [25] . Some players in the sector are
6. Another important role of taking advantage of public
go This goal has been to payment policy initiatives to
promote the education of users converge towards hybrid models
on monetary digitalization two where mobile services are
issues, generating social mixed with banking services.
networks to disseminate Examples of these players are:
knowledge. Mobikwik, Paytm, Freecharge,
The payments segment has been Itzcash, Momoe or Suvidha,
the fastest growing in the companies for which expectations
FinTech ecosystem of this country are very high. According to a
due to demonetization issues. study carried out by Boston
Without em However, banking Consulting Group and Google,
technology solutions, including these companies will drive a
B2B products, are also revolution in this sector that
experiencing strong growth, but will culminate in 2023 when
enabling financial institutions digital payments surpass cash
to create solutions aimed at end payments [ 3 ] .
users. Meanwhile, the lending sector
is the second largest FinTech
segment in India. The segment
The users are young people between
covers the financing gap that
25 and 34 years old, as is the case in exists between MSMEs and
most ecosystems. traditional financial
Below is an overview of the institutions. MSMEs contribute
segments that stand out in India, 37% to the GDP and the financing
with some examples of active need they require is 200 billion
startups. dollars, which makes the growth
The payments segment stands of startups in this segment
out for its great adoption and notable [ 25 ] .
development even though in India, Within the regulatory measures
im placed on these firms is that
unlike what happens in developed
they can only act as
economies, the use of cash is
intermediaries, putting those who
still important. It is estimated
require resources in contact with
that 80% of transactions in this
country are carried out in cash, those who can provide them . Some
however, the growth space for players in the sector are taking
this sector is estimated at 500 advantage of public payment policy

65
 Fintech in the world: the digital revolution in finance has arrived in Mexico

initiatives to converge towards hybrid offer in the shortest possible

models where mobile services they time.
mix EARLYSALARY

with banking services. earlysalary.com

Founded in 2015, it is a mobile
the. The loans are limited to INR lending platform that provides
1,000,000 which is equivalent to salary advances and instant cash
almost 14 thousand US dollars. loans. neos, using an intelligent
Platforms must comply with the risk scoring system. The startup
principle of confidentiality of has current operations in eleven
user data and offer full trans cities including going to Mumbai,
parity in operations. Finally, Pune, Chennai, Bengaluru,
the platforms that offer the Hyderabad, New Delhi, Jaipur,
service must submit financial among others.
reports with some regularity to MONEYTAP
the authorities, as well as a moneytap.com
summary of complaints [ 25 ] . It is a flexible loan startup for
Among the success stories of consumers. Currently serving
this sec ment are: clients with low monthly income.
FAIRCENT The technology behind this
platform solves problems of
faircent.com
insufficient credit for consumers
Platform launched in 2014 that
who need money for purchases,
offers a variety of tools such as
tuition payments, rent, weddings,
Au to-Invest, which matches a
money transfers, among others.
lender's investment criteria with
the requirements borrower's
Additionally, the banking
cough. Automatically send
segment gital which includes
proposals to the borrower on
software solutions, fraud, risk
behalf of the lender, based on
management, regulatory compliance
pre-selected lending criteria
and other banking solutions, is
such as lending trends, amounts
the segment that forms the basis
and risk profile.
for the development of the
RUBIQUE
underlying processes necessary
for digital transactions to move
rubique.com
towards real-time verifiable
Also launched in 2014, it is an
systems. The segment has seen 74
online marketplace for financial
companies emerge since 2008, of
products that offers a wide range
which 6 are more recent [ 25 ] .
of end-to-end credit and loan
This is a growing segment in the
products for individuals and
Indian FinTech space. In this
MSMEs. It has a loan solution led
segment, the use of technology
by technology gy that allows the
based on artificial intelligence
client to obtain the best credit
stands out, revolutionizing the

66
 Bancomext

customer experience by offering a A bot is a computer program that automatically performs

repetitive tasks through Internet net, the realization of which
them more personalized services.
by a person would be impossible or very tedious.
Since 2016, these technologies
have been tested in customer
This information serves insurers
service through “ bots ”, as well
to predict the behavior and
as for the selective marketing of
health status of the insured.
financial products and services
Some examples are: LIC
through indicators obtained from
(licindia.in) and Bajaj Allianz
the Web.
Life
Finally, the InsurTech
(bajajallianzlifeonline.co.in) in
segment, although it has grown
life insurance; Acko (acko.com)
moderately as standing with the
and Digit Insurance (godigit.com)
other segments, we have demos
as fully digital offerings such;
brought into its transactions, a
as well as others added to the
significant cost reduction, as
market to manage the best
well as better risk management
policies, such as Policy Bazaar
and some process efficiencies.
(policybazaar.com) and Coverfox
Its speed of adoption by the
(coverfox.com).
population in India has been
For India, the issue of
slow, but it is expected to
financial inclusion remains a
accelerate given the expectations
“dream”. Despite the enormous
it has generated around users and
Despite the efforts that the
the technological access they
Indian banking sector has made on
have.
this issue, the processes remain
plagued by inefficiencies.
The speed of adoption in the
FinTech startups, unlike
InsurTech segment by the population traditional financial
in India has been slow, but is institutions, bring with them an
advanced perspective for
expected to accelerate given the
consumers with the intention of
expectations it has generated around achieving the goal of inclusion
users and the technological access that this economy has set for
itself. Its focus always is and
they have.
will be the consumer.

The technology that stands out

in this sector is IoT (Internet It is estimated that 80% of
of Things) mainly due to the data
transactions in this country are
that can be collected through
devices that are used for other carried out in cash, however, the
purposes but that generate growth space for this sector is
information about the health and
estimated at 500 billion dollars by
well-being of consumers.
2020.

67
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Kenya Kenyan financial system resulting

in the evolution of great FinTech
innovations for markets not
served by the traditional
financial chain ditional.
However, the focus is only on the
mobile money segment, while other
segments such as Insurtech,
Cryptocurrencies and Blockchain,
still represent an opportunity to
develop in Kenya.
In regulatory matters, the
focus has cia FinTech products
has always been reactive. Policy

AND he FinTech appears to develop in reaction to

sector in emerging technological advances;
Kenya is one but overall, policies have been
of the fastest growing in Africa cautiously receptive. Different
with technological development regulatory bodies govern the
that day after day defines the FinTech industry, so there is a
way business is done in this need for a single, comprehensive
country. Kenya began its body that deals exclusively with
financial revolution in 2007 when technology. The Central Bank of
the M-Pesa firm began operating. Kenya is the main regulator that
Therefore For more than a decade, governs financial services and
this country began to take giant formulates financial policies.
steps in favor of financial The Central Bank's policies are
inclusion. M-Pesa is a platform receptive to technology, but are
that offers various services to very cautious. For its part, the
users such as making payments Ministry of Information,
with a mobile phone, sending and Communications and Technology
receiving money between users establishes policies in the
(and non-users), booking hotels, technology sector. This body is
withdrawing cash from ATMs, among keen to explore opportunities in
others. Its performance, after 11 the FinTech space. Thus, for
years in operation, surpassed the example, it has formed a
highest record in the number of collaboration with the Ministry
mobile money transfers in 2018, of Lands and IBM Corpo ration, to
revealing the great opportunity pilot the use of financial
that exists in the Digital technology in the management of
Financial Service (DFS) sector of property records. However, the
this country [ 7 ] . use of smart contracts is still
M-Pesa set the pace of minimal [ 7 ] .
evolution and innovation of the

68
 Bancomext

M-Pesa is a platform that offers recorded expo growth nential over

the years and has so far
various services to users such as
disbursed more than $100 million
making payments with a mobile dollars, and distributed more
phone, sending and receiving money than 6 million in loans [ 24 ] .

between users (and non-users), UMATI CAPITAL

booking hotels, withdrawing cash umaticapital.com

It was launched in September 2012
from ATMs, among others.
and offers credit and related
Its performance, after 11 years in payment technologies. In 2015 he
operation, surpassed the highest won the annual Zambezi financial
inclusion award. In 2016 the
record in the number of mobile
Alliance for a Green Revolution
money transfers in 2018. in Africa (Agra) also made a
The loan segment is focused, significant donation to this
as in many other emerging platform to support smallholder
economies, on granting credit to farmers. cultists under the
people and MSMEs that do not have supply chain financing product.
access to the system. traditional
felling
financial system. The rise of
mobile money in Kenya has allowed tala.co
alternative lenders to use it It is a micro-credit application
with technology vergence to reach through the smartphone that
more customers and reduce the offers users small instant loans.
cost of obtaining credit. Along To date the application has more
the way, new ways to extend than 100,000 downloads in the App
credit to small and micro- Store. The company re raised more
business segments have been than $3.09 million from investors
developed. The formal lending to fund expansion into new
industry is regulated given by markets last year. Tala currently
the Central Bank, but there is no operates in East Africa and
legislative framework that Southeast Asia with its main
governs alternative lending markets in Kenya and the
platforms [ 7 ] . Philippines [24] .
Some success stories in this
segment are [24] : For its part, the Payments
segment, Reme sas and Foreign
BRANCH INTERNATIONAL
Exchange is governed by the
branch.com.mx regulation of the Central Bank of
It is a micro-loan platform that Kenya. Mobile money transactions
allows clients to access are the most widely used form of
instantly through their payment. Additionally, payment
smartphones. Since its launch in card companies are involving
2015, the FinTech company has banks as much as possible. cals

69
 Fintech in the world: the digital revolution in finance has arrived in Mexico

with new features such as peer- time using mobile wallets to

to-peer transactions to harness empower farmers across Africa, as
the potential of digital well as serve the transactions of
payments. Regarding remittances, millions of merchants and public
the Central Bank conducts a services across Africa. Founded
survey on remittance flows every in Nigeria and Kenya in 2004, it
month through formal channels, has expanded to nine other
which include commercial banks African countries and around 12%
and other authorized remittance of mobile consumers. Those in
service providers in Kenya and Africa can make payments using
these have been found to be an their solutions. Its reach is due
im important contributor to the to alliances with more than 90
growth and development of the banks and several mobile payment
country [ 7 ] . platforms across the continent
[ 24 ] .

Mobile money transactions are the BITSOKO

most widely used form of payment. bitsoko.wordpress.com

It is a mobile wallet that uses
Additionally, payment card
blockchain in an attempt to
companies are engaging local banks eliminate the cost of trans
with new features such as peer-to- transfer of money between two
people and increase access to
peer transactions to harness the
payment services. The startup's
potential of digital payments. approach is to integrate
blockchain with mobile money,
In 2015, the Central Bank allowing funds to be sent via
authorized M-pesa to make cross- Bitcoin and received in the
border transfers. mobile money currency of the country in
terminals. This encouraged other question.
companies to develop remittance
JAMBOPAY
services. However, there are no
monetary controls in Kenya for www.jambopay.com
this sector and therefore the It is an online payment platform
exchange must take place through that Allows users to securely
a registered bank or regulated make and receive payments via
financial institution. mobile phone.
Examples of this sector in Buyers can pay for goods and be
Kenya are [24] : vices online, while sellers can
CELLULLANT receive payments for purchases
made online as well. JamboPay
www.cellulant.com
provides pa gos to over 3,500
Digital payment services platform
organizations in Kenya, Uganda,
that requests, collects, resolves
Tanzania and Rwanda and has over
and reconciles payments in real
1.8 million subscribers to its e-

70
 Bancomext

wallet [24] . and human capital to invest, research

The crowdfunding segment is not and eventually develop at a

very popular in Kenya mainly due population scale.
to the regulation that companies
However, one of Africa's most
currently have. cro-financial and
that cover the same needs. important attributes is the ability to
Furthermore, Kenya is the East “quantum jump” redundant eras to
African hub for financial
achieve technological advancement.
services and investments.
Domestic institutional investors
[ 33 ]
(mainly pension funds and
insurance companies) are
investing I tend more and more to
trusts ting the participation of
citizens in stock investments and
in wealth management transactions
[ 7 ] . A success story on the topic

of financial markets is [ 24 ] :

ABACUS

abacus.co.ke
A platform that uses web and
mobile software to help investors
around the world access financial
markets certain Africans. The
company makes it possible for
local and international
investors nals research and
invest anytime, anywhere. In
2016, Joel Macharia founder and
CEO of Abacus was one of the
Kenyans named in Forbes Africa's
30 Most Promising Entrepreneurs
list [24] .

The innovation that makes up an

industry takes time.
It is through those small, incremental
improvements that a new business or
industrial paradigm is eventually
achieved. This often does not happen
in economies that have the financial

71
CHAPTER 4

FinTech in
Mexico
 Bancomext

Beyond the volume of current transactions carried out by Fintech

startups compared to traditional financial institutions, one of the
essential aspects lies in the rapid growth of these financial
alternatives. ras, as well as its ability to reach larger sectors of the
population. Consumers willing to increasingly use the solutions
offered by FinTech startups are attracted by the speed,
convenience and transparency offered by the platforms. This
chapter describes will improve the state of the art of the FinTech
ecosystem in Mexico co based on data collected for 2018 by
Finnovista.

Industry size

In August 2018, Mexico

slightly below the other three
main ecosystems in the region.
surpassed the barrier of 300
Brazil experienced annualized
FinTech startups to position
growth of 48% [ 27 ] , Colombia 52% [
itself as the second most
29 ] and Argentina 56% [ 26 ] , while
important ecosystem in Latin
Chile only grew 22% [ 28 ] in the
America. na. In just 12 months,
last year. Regarding the
96 new FinTech startups were born
mortality rate, this is positive
in Mexico. In recent months,
in Mexico compared to other
Mexico has taken great steps to
countries, as it stands at 12%
advance in the development of
compared to the 14% observed in
FinTech innovation and position
itself as one of the powerful Brazil [ 4 ] . Translated into the
cial global FinTech hubs. Since number of companies, the rate
2017, it has surpassed the total represents a total of 29 FinTech
number of countries in the region startups that have stopped
with 238 startups. However, operating in the last year and,
although in 2018 it reached 334, therefore, the total sum of those
it was behind Brazil, which has that emerged is 125 new firms [ 32 ]

377 since June 2018. The echo .

Mexican system is more than 2.5 The consolidation of the
times larger than that of ecosystem is in sight based on a
lower growth rate than other

73
 Fintech in the world: the digital revolution in finance has arrived in Mexico

GRAPH 2. Number of startups per country in the region

MEXICO 334 29 %

COLOMBIA 124 11 %

ECUADOR 31 3%

PERU 45 4%

BRAZIL 377 33 %

CHILI 75 6%

URUGUAY 12 1%

ARGENTINA 110 10 %

country number stake

Source: Fintech Radars (Finnovista 2017, 2018); Fintech – Innovations that you didn't know were from Latin America and
the Caribbean (IDB-Finnovista, 2017).

GRAPH 3. Growth by country in the region

56 %
48 %

40 %

52 %

Source: Fintech Radars (Finnovista 2017, 2018); Fintech – Innovations that you didn't know were from Latin America and
the Caribbean (IDB-Finnovista, 2017)

74
 Bancomext

GRAPH 4. Participation by segment in the Mexican FinTech market

22% Payments and 7% Business technologies them

remittances for financial institutions

6% Insurance

22% Loans

3% Wealth management

Alternative scoring,
13% Finance Management
identity and fraud
business

2% Trading and market

11% Personal finance
capital
management

9% Crowdfunding 1% Digital banking

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

The structure of the FinTech The least advanced segments

market in Mexico is characterized but that show an increase in the
by a greater part cipation of the number of firms every day are
payments and remittances segment, insurance with a
which with 75 startups covers 23% 6% of the total (19 startups);
of the total startups that exist. wealth management with 3% (10
Slightly below this segment is startups); alternative score,
the lending segment with 74 identity and fraud also with 3%
startups, 22% of the total firms (11 star tups); Trading and
operating in the country. market capitals with 2% (6
Thirdly, the ges segment is startups); and digital banking
located tion of business finances with 1% of the total (5 startups)
with 13% of the participation (45 [ 32 ] .

startups), followed by personal From graph 5 it can be seen

finances with 11% participation that the highest growth rate of
(36 startups). Those with the the last mos 12 months is
lowest participation are manifested in the smallest
crowdfunding, with 9% (30 segments of the country,
startups) and business demonstrating its high potential
technologies for financial and acceptance in the Mexican
institutions, which covers 7% (23 market as well as greater
startups), although growing [ 32 ] . diversifi cation on the type of

75
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Fintech solutions. Particularly

relevant is the growth in
Business Technologies for
Financial Institutions, which
grows by 130%. Trading and
Capital Markets also grows 100%
to go from 6 to 11 startups. And
Asset Management reaches 67%
growth with 4 new startups in
operation [ 32 ] .

76
 Bancomext

These solutions appear to cover new startups in the Di Banking

segment gital, which did not
market needs, mainly triggered by
exist in 2017. Digital Banking
new generations of young people. solutions have become popular in
Brazil, where there are 16 firms
For their part, the four operating in the market, with a
segments FinTech weighting growth of 147% in just one year.
companies in Mexico also These solutions appear to cover
experienced high growth during new market needs, mainly
the analyzed period. All reach or triggered by new generations of
exceed 30% growth and these are young people who require digital
the Payments and Remittances and ubiquitous banking solutions
(42%), Loans (37%), Crowdfunding [32] .
(36%) and Business Finance When comparing the
Management (29%) segments. There distribution of sec FinTech ments
are also, here those that have in Mexico with the two main
grown, but more slowly, such as ecosystems of Latin America
the Insurance segment with a (Brazil and Colombia) it is
growth of 27% and the Personal perceived that the three share
Finance Management segment with a the same “star” segments although
growth of 6% during the last 12 with some variations: Payments
months [ 32 ] . and Remittances, Loans and
It is worth highlighting the Business Finance Management
appearance of 5 new FinTech (Chart 6) [ 32 ] .

GRAPH 5. Growth and number of FinTech startups 2017 and 2018

■ 2017 ■ 2018 Growth

77
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

78
 Bancomext

GRAPH 6. Comparison of FinTech activity in Brazil, Colombia and Mexico

Colombia ■ Mexico ■ Brazil

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

The Payments and Remittances Brazil only 5 recently created

segment is the largest segment in firms appeared tion. This reveals
the three countries, which a greater openness of Mexican
reflects the importance that financial institutions towards
mobile devices have gained to the incorporation of FinTech
carry out transactions. actions. solutions in their businesses.
The difference is found with the Likewise, the difference in the
other two segments. While the growth of the Insurance segment
Loan segment is the second stands out, which in Brazil
largest in the Mexican and represented 73% in the last 12
Colombian ecosystem, in Brazil it months, while in Mexico it only
is in third position, proving lly grew 27%. Which reveals that the
due to regulatory restrictions current state of development of
facing the Brazilian economy. this segment in the Country is
The greatest differences affected by a more conservative
between Brazil and Mexico style of the insurance industry,
converge in growth patterns ment which does not seem to be willing
of the segments. For example, to take risks [ 32 ] .
Business Technologies for Slowing growth in insurance
Institution nes Financieras is segment reflects stagnation in
the one that experiences the sec ment in Mexico at a time of
highest growth rate in Mexico strong transformation and growth.
with 13 new startups, while in The need for efficient and

79
 Fintech in the world: the digital revolution in finance has arrived in Mexico

ubiquitous digital insurance is

clear for the country, so the
most innovative insurers will
take advantage of this
opportunity. ity to incorporate
innovations from both Mexican and
foreign InsurTechs, as happened
with the Spanish startup Bdeo
that launched its video appraisal
service with leading insurers in
Mexico.

80
 Bancomext

To conclude with the analysis For its part, Crowdfunding

of the sec ments, a figure is leaves the stage of accelerated
presented below that shows the S- growth to enter reach the stage
Curve of the life cycle of the of stable sales, even that the
FinTech industry in Mexico, number of companies that offer
placing the segments according to this service is still lower than
the number of startups and growth that of the strong segments.
rate. The size of the circle Meanwhile, the Tec Business
represents the number of startups noologies for Financial
operating and its location on the Institutions take off from the
curve is determined by the growth stage of attention to niches to
rate or pace. With this tool it begin a stage of high growth
can be decreed that the star rates. Finally, the Scoring,
segments Loans, Payments and Wealth Management, Trading and
Remittances, Business and Digital Banking segments are
Personal Finance Management grow still serving market niches, and
at more stable rates, which most likely are companies that
places them within a stage of have few clients, but growing at
normalized growth. relevant rates.

GRAPH 7. Life cycle of Fintech segments in Mexico

NICHE PROGRESS NORMALIZATION MATURITY SLOPE

business finance
Managemen
t

81
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Source: Fintech Radars (Finnovista 2017, 2018); Fintech – Innovations that you didn't know were from Latin America and
the Caribbean (IDB-Finnovista, 2017).

82
 Bancomext

Analysis of established GRAPH 8. Hometown

businesses

Based on a survey carried out

2% Puebla
18% Others
by Finnovista in early 2018, data 61% CDMX
was collected about 110 FinTech
startups that operate in the
Mexican ecosystem and were asked
questions about different aspects
of their business. Next, each of
the topics addressed with the pro
is analyzed. purpose of knowing
details about the origin of each
one, its internationalization
achievements, the maturity of its
product, the number of employees
who work in it, the age of the
company, the target customers,
9% Guadalajara
the technology used, the funding
6% Monterrey
rounds achieved .
4% Merida

City of origin and internationalization

Source: Finnovista Fintech Radar (RadarMexico
Finnovista, 2018)
The majority of FinTech startups
are located in Mexico City. 61% GRAPH 9. Internationalization of Mexican FinTech
of the firms surveyed place CDMX startups
as their city of origin.
Guadalajara is the second city in 17.3% International Expansion

the Mexican territory in number

of FinTech startups, 9% of those 82.7% Only in Mexico

surveyed turned out to be located

in this city. The rest is
distributed between the cities of
Monterrey, with 6%, Mérida with
4% and Puebla with 2% [ 32 ] .
Regarding the
internationalization process
tion, 83% of the firms surveyed
state that they only operate in
Mexico, while 17% have expanded
their operations outside the
Mexican border.
When comparing the rate of
Source: Finnovista Fintech Radar (RadarMexico
expansion abroad with rates in Finnovista, 2018)
countries in the region such as
Brazil, the Mexican rate is a
lower rate. In Brazil 30% 83of
companies have operations tions
outside their country, as well as
Argentina, the country where the
 Fintech in the world: the digital revolution in finance has arrived in Mexico

GRAPH 10. Internationalization by country in Latin America

Colombia Chili Peru Brazil

Honduras Costa Rica Guatemala Panama Bolivia

8.7 % 4.3 % 4.3 % 4.3 % 4.3 %

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

GRAPH 11. Internationalization of Mexican Fintech

startups by region Of the firms that operate
outside Mexico, 62% have
operations in Latin America and
Asia 8.6%
Europe 5.7%
the Caribbean, while 38% have
left the region, a figure twice
as high as in Brazil. Colombia is
the main destination country for
Mexican FinTech startups, with
30% of those expanding rum
operating in this country. Chile
and Peru follow, each being the
destination of 17% of the firms.
Only 9% of Mexican FinTech
startups attended Brazil. On the
other hand, it was detected that
Caribbean countries such as
Honduras Ras, Panama or Costa
Latin America & Caribbean 67.7% Rica are among the main
USA & Canada 20% destinations for Mexican FinTech
startups, which shows that
through internationalization,
Source: Finnovista Fintech Radar (RadarMexico these companies seek to establish
Finnovista, 2018)

84
 Bancomext

GRAPH 12. Number of FinTech startups by business maturity stage

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

destination for Mexican firms, Startups seek to establish

since 19% have operations in themselves in earlier-stage
those two countries. They have
ecosystems in search of less
also expanded towards Europe by
11% and towards Asian countries exploited market opportunities.
by 8% [ 32 ] .

Ecosystem maturity and number of employees

Regarding the maturity that the echo goes through Mexican FinTech
system, it was determined, from the sample interviewed, that 78% of
FinTech startups are in an advanced stage of development, above the
66% registered in Brazil. Specifically, 31% are in the growth stage
and ex pansion, while 47% are ready to climb. Likewise, 22% of the
remaining FinTech startups are in the initial stages of development,
mainly in Beta versions ready for commercial launch, since 16% are
in this stage [ 4 ] .

85
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Despite the advanced state of

GRAPH 13. Number of employees
madu rez in which most of the
Mexican ecosystem is located and
like other important ecosystems
in the region such as Brazil, the
majority of startups are still 53.6% 1-10 Employees
small in size in terms of the
number of employees, since 54% of
these have between one and ten O.G.
employees, while only 8% of those
25.5% 11-25 Employees
surveyed have more than 50
employees [ 32 ] .

00000
The majority of startups are still small
13.6% 26-50 Employees
in size in terms of the number of
employees, since 54% of them have
between one and ten employees.
000000000
13.6% 51-100 Employees

000000009
3.6% +100 Employees

Source: Finnovista Fintech Radar (RadarMexico Finnovista,

Age, target client and base technology

Regarding the age of the

companies, we observe that
Mexico's FinTech ecosystem is
largely made up of young
startups, since 85% of them are
less than five years old.
Concrete Mind you, 45% are less
than two years old, while 31%
were born three or four years
ago, and 9% were born four or
five years ago. Only 15% of firms
are more than five years old
[ 32 ] .

According to data from the

World Bank, in Mé xico 37% of the
adult population has access to an
official bank account, which

86
Bancomext

implies that the country's

unbanking rate is 63%, higher
than the average for the region
(51%). Even so, the market for

87
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Underbanked and unbanked

GRAPH 14. Age of Mexican FinTech startups
consumers and SMEs continue to be
the main target segment of
9.1 %
FinTech startups in Mexico, a 4 to 5 years
segment known as the “for
inclusion” segment. Specifically, 15.5

54% of the Mexican FinTech

startups surveyed claim to direct
their products or services to
this segment, a percentage that
has increased mentioned since
2017, when it was identified that
46% of Mexican firms directed
their services towards it. On the
other hand, the percentage is
also higher than the rest of the
main ecosystems in the region,
since in Brazil 35% focus
solutions on the financial
inclusion segment, in Colombia
45%, in Argentina 41% and in 3 to 4 years

Chile 40% [32] . 44.5 %

less than 2 years
In Mexico 37% of the adult
population has access to an official Source: Finnovista Fintech Radar (RadarMexico
Finnovista, 2018)
bank account; which implies that the
GRAPH 15. Target client of Mexican FinTech startups

54 %
Banked SMEs

27 %
B2B Corporate
& Financial institutions

12
B2C Banked Consumer

7%
SMEs Financial Inclusion
& Consumer

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

88
 Bancomext

The technologies used and traditional companies such as

under which Mexican FinTech banks, and the technological
startups base their products or innovation capacity of FinTech to
services are mainly three: Big improve consumer services. This
Data and Analytics (25%), APIs process reflects how financial
and Platforms. more Open (17%) institutions are increasingly
and Mobile and Applications (15%) betting more on co labor in
[ 32 ] . It highlights the search of new opportunities,
importance that open banking is seeking to minimize the pressure
gaining in terms of the that comes to the market with the
connection between the products entry of new players into the
and services of different industry, which are gaining
GRAPH 16. Base technologies of Mexican FinTech startups

OTHERS

BIG DATA & ANALYTICS

MACHINE LEARNING

OPEN PLATFORMS & APIS

CLOUD
COMPUTING

89
HARDWARE
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

90
 Bancomext

Funding received to grow

GRAPH 17. Total amount of funding achieved by Mexican
FinTech startups
Of the 110 startups surveyed, 64%
res stated that it has received
financing from third parties in
the past, which demonstrates the
importance of external financing
48.6% Less than 100K
avenues for the development of
businesses. mentments in Mexico.
Even so, this issue in Mexico is
still incipient since companies
27.8% 100 - 500K
raise small amounts compared to
those raised in developed
countries. 49% of Mexican FinTech
firms have received less than one
hundred thousand dollars, while
only 7% raised more than one 16.7% 500K - 1M
million dollars. These are lower
figures than those presented in
Brazil, where 13% of FinTech
startups claim to have raised
more than a million dollars [ 32 ] .
However, in the last year they
have major financing rounds by
Mexican FinTech startups, such as
the lending company Konfio, 5.6% 1 - 5M

raised a capital round of $89

million led by Bostok Emerging
Finance. For its part, Coru
(previously ComparaGuru) earned 7
million, endorses given by QED
Investors. And finally, there was
also a successful round of 6
million raised by the payments
startup ePesos, led by Santander 1.4% + 5M

InnoVentures [ 32 ] .

Source: Finnovista Fintech Radar (RadarMexico

External financing in Finnovista, 2018)

Mexico is still incipient because

companies raise small amounts compared to those raised in developed
countries.

91
 Fintech in the world: the digital revolution in finance has arrived in Mexico

GRAPH 18. Financing sources used by Mexican FinTech startups

Financial institutions 3.4% 13.6 %

Accelerator / Incubator
Other corporate entities 3.4%

Government supports 0.8%

Crowdfunding Platforms 2.7%

Foreign venture capital 12.2% 26.5 %

angel investors

Friends, Family and Fools 19.7% 17.7 %

Local venture capital

Source: Finnovista Fintech Radar (RadarMexico Finnovista, 2018)

GRAPH 19. Funding received among Mexican FinTech startups

are angel investors. 27% of
startups have received funds of
63.6% YES
this kind. Unlike other
The main sources of financing
ecosystems, the vast majority of
36.4% NO Mexican FinTech firms (20%)
continue to recover leasing to
the closest funding sources, what
is known as the “3 ees”: Friends,
Family and Fools. Acceleration
and incubation programs also
stand out as an important
alternative for obtaining funds
in Mexico, since 14% of
companies prisoners have
participated in some initiative.
Finally, it is also important to
highlight the importance of the
investment received by venture
capital companies, since 18% of
Source: Finnovista Fintech Radar (RadarMexico FinTech startups in Mexico have
Finnovista, 2018)
received financing through local
funds and 12% from foreign funds [

92
 Bancomext

.
32 ] progress in regulatory matters or
Likewise, the financing plans opening by financial entities
referred to by the companies traditional companies to
surveyed with Vergen in the collaborate with new players in
search for continued investment, the industry. Therefore, the
following chapters will address
The wave of FinTech innovation could
trend issues and an analysis of
have repercussions on the traditional regulatory issues. tories and
banking sector, for which a loss of 4.7 cooperation that would guarantee
trillion dollars is estimated. the sustainability of the
ecosystem over time.
since 71% of companies are
Mexican regulation
currently seeking funds, of which

AND
71% do so by offering company
n Mexico,
equity, while 29% do so through
the Law to
the acquisition of debt [32] .
regulate
It is clear that the wave of
institutions tutions of financial
FinTech innovation has become a
technology, better known as the
global phenomenon that could have
FinTech Law, was approved by the
repercussions on the traditional
plenary session of the Chamber of
banking sector, for which an
Deputies, after having been, in
estimated loss of 4.7 trillion
particular and in general, by the
dollars in revenue compared to
Senate, on March 1, 2018. The law
FinTech companies [ 32 ] . Latin
represents, without a doubt, the
America is no stranger to this
modernization of the financial
revolution, and what were once
system Mexican market and the
specific innovations in some
closing of the gap that arises
markets have now become a
between the innovation of the
widespread trend throughout the
sector and regulation, due to the
region. This wave of financial
speed that the former entails [ 17 ]
innovation is especially
.
important in countries where a
This new regulatory framework
large part of the population is
places Mexico among the few
outside the formal financial
economies in the world that have
system, and this is how FinTech
such a complete law that seeks to
positions itself as an
regulate, even, blockchain and
alternative with solutions that
cryptocurrencies. Its purpose is
vary from platforms for sending
to provide greater certainty and
remittances, to digital payments
legal security to investors and
through smartphones.
users of these technologies,
However, certain critical
creating for this purpose the so-
factors are still lacking to
called financial technology
achieve continued growth.
institutions (FTI) and their
foundation, development and
services [ 20 ] .
acceptance of the sector, such as

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

FTIs are classified into two acquisition tion of titles

types: (1) Crowdfunding representing share capital of
Institutions (CFIs); (2) the companies that act as
electronic payment fund applicants.
institutions (IFPE). Operations 3. Collective financing models
of both types must be carried out of co-ownership or royalties, in
with the authorization of the which joint ventures or other
National Banking and Securities types of agreements are entered
Commission (CNBV) and must comply into to acquire an aliquot part
with the following basic or participation of an asset,
requirements: income, profits or royalties that
• Have social bylaws that come from a project of the
comply with the provisions of applicant. For their part,
the Fintech Law Electronic Payment Fund
• Have a risk disclosure Institutions (IFPE) are those
policy that provide regular and
professional services. purposes
This new regulatory framework places of issuance, administration,
redemption and transmission of
Mexico among the few economies in
electronic payment funds.
the world that have such a complete
law that seeks to regulate, even, The sandbox creates an environment
blockchain and cryptocurrencies. in which entities can test new
products or services, within a limited
• Have a business plan
• Have a fraud prevention scope, before offering them en masse
policy and operations with on the market, while the supervisor
resources of illicit origin
can monitor their operation. cos
• Have information about the
through computer platforms,
administrative body of the
legal entity Financing interfaces and internet pages [ 20 ]

Institutions .
Collective (IFC) that provide Regarding cryptocurrencies,
crowdfunding services comprise the law explains them as virtual
three models according to this assets, and defines them as any
law: representation of real value.
1. Collective debt financing registered electronically and
models, which grant loans, used among the public as a means
credits, or other financing of payment for all types of legal
through direct liabilities to acts, whose transfer can only be
applicants with collection of made by said electronic means.
the corresponding interest. The law authorizes both ITFs and
2. Capital crowdfunding models, traditional credit institutions
which refer to the to use only those virtual assets

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 Bancomext

that are determined by the Bank environment in which entities

of Mexico, which will define With the law, FinTech startups have
their characteristics, as well as
the opportunity to play at the same
their conditions and
restrictions. level as traditional institutions, what is
The law also contemplates a known as a “level playing field” and
regulatory provision popularly
this requires that new firms also
known as sandbox , which allows
the implementation of new comply with the provisions of laws
products, services and business such as money laundering. .
models of an innovative nature,
through the so-called novel can try new products or services
models , which will require dosed, within a limited scope,
temporary authorization from the before offering them en masse on
corresponding financial the market, while the supervisor
authority. This provisional space can monitor their operation.
for innovation allows you to According to other experts, this
create within a free environment. figure will generate innovation
The word sandbox translates in the sector in a professional
into Spanish as “sandbox.” It manner and with an economic and
refers to the sandboxes that financial support [ 16 ] .
children use to play and create The secondary provisions of
from this material. In the FinTech Law were published in
information In essence, a sandbox the Diario Ofi cial of the
is an area of memory completely Federation on September 10, 2018.
isolated from the rest of the With them, the additional
memory. available memory, with information and documentation
the aim of executing a program or that must be provided is
application to verify if it established. sit to act as a
contains malware or malicious Financial Technology Institution
software, without putting the (FTI), including the financial
operating system and therefore situation and the origin of
the computer or mobile device at resources. Some of these rules
risk. Both definitions presented second rias determine the minimum
are intuitive tives, however, the capital amount for ITFs, taking
academic definition of this into account the type of
concept specifies it as a process operations they are authorized to
of environment separation with have, as well as the additional
the purpose of ensuring the activities they carry out and the
execution of tests of something risks they face.
new without affecting the rest of To provide consistency and
the system. harmonization to the regulation
According to the Inter- provided by the FinTech Law, it
American Development Bank (IDB), will be necessary that other
the sandbox allows generating an laws, including the Law on

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

Prevention and Identification of brings with it different

Resources of Illicit Origin challenges for ITFs in
(money laundering), be adjusted, technological terms, some of
since with the law, FinTech which involve aspects of
startups have the opportunity to cybersecurity in relation to the
play at the same level as governance of information
traditional institutions technologies (within corporate
additional, what is known as an governance). ) and proper
“even playing field” and this cryptographic protection of
requires that new firms also information in connection with
comply with the provisions of the case of virtual assets [ 20 ] .
laws such as money laundering, so
that the ecosystem is even safer Some FinTech companies may not
[ 17 ] . obtain a license to operate due to
Although the regulation seems
their size or the high costs that could
to have It was achieved in an
environment of open discussions, be generated by complying with all
negotiations and concessions the requirements contained in the
between the regulatory authority
law.
and the ecosystem. Based on
secondary regulation, cases have
been identified that can be seen
as “yellow” and “red” hot spots
for some FinTech startups. For
example, some FinTech dams may
not obtain a license to operate
due to their size or the high
costs that could be generated by
complying with all the
requirements contained in the
law. In the specific case of
IFCs, or crowdfunding companies,
they will not be able to publish
requests on their platforms.
financing amounts for projects
that require amounts greater than
seven million 370 thousand
Investment Units (UDIs), that is,
that exceed 44.5 million pesos.
This will not allow large
projects to be funded using the
collective financing mechanism.
Finally, the new regulatory
framework that applies to a
totally digital environment

96
CHAPTER 5

Challenges
and
opportunity
from the
FinTech
sector
 Bancomext

It is evident so far that the financial industry is experiencing

unprecedented change. Traditional banking services have been
modernized thanks to new FinTech startups. Blockchain technology,
for example, is revolutionizing by providing security and speed to
each transaction, in addition to doing so at a lower cost and with a
global reach.

Q
Therefore, these attacking customer loyalty by
innovations have the offering them more personalized
capacity to transform products and services. Still,
the world. financial many banks view these FinTechs as
norm in the coming years. small financial players without
However, as happens with all the means to capture sufficient
innovation, the power of market share. However, these
financial technologies will firms are increasingly gaining a
manifest as they evolve, in the reputation for closing the gap
meantime, it must They will face between what financial services
certain challenges that will companies currently offer, versus
consolidate them as a reliable what customers today want.
and large-scale industry. The fronts of the financial
There are five challenges sector tra Additionally, most
identified: impacted by FinTech are [ 10 ] :
1. Collaboration between fi
NEW BUSINESS MODELS
institutions financial
companies and FinTech startups The emergence of FinTechs has
2. Customer focus driven the introduction of new
3. Regulation business models such as peer-to-
4. Data security and privacy peer (P2P) lending, which can
5. GAFA: The technological have a significant impact on the
giants traditional lending sector.

A FASTER AND EFFICIENT SERVICE

Collaboration between financial
Startups use a variety of tech
institutions and FinTech startups
noologies that increase the

h Until recently, FinTech accessibility and speed of their

startups have established services (real-time updates,
themselves in the mobile connectivity) that
financial ecosystem as the significantly improves the
largest am naza for banks, customer experience.

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

TRANSPARENCY AND FREE SERVICES barriers to entry and stimulating

They often offer their services competition, forcing large
for free or with long promotional traditional firms to optimize
periods. They also proactively their processes.
inform you of any fees they would ADVANCED DATA ANALYSIS
charge in advance.
Advanced data analytics combined
PERSONALIZATION with a broader set of information
FinTechs are pioneers in customer sources gives FinTech companies
service and personalized better management and
products, which has prompted underwriting capabilities, which
traditional banks to rethink how is leading to lower costs and
customer data can be used to greater efficiency.
offer individual products. Banks are reacting differently to
these innovations. Some, like
PRESSURE ON MARGINS AND QUOTAS
Santander Mexico, support
FinTech firms do not have incubation in hopes of
infrastructure legacy structure, cultivating their own playground.
so they can keep costs low and Others such as BBVA, Scotiabank
provide services at lower prices. and Goldman Sachs are taking

PREDICTIVE MODELING
advantage of their ta hand and
its assets to invest and/or buy
Financial platforms use tools
companies. Some like Bank of
predictive and analytical tools
America and JPMorgan Chase have
that allow them They aim to find
partnered with the players.
similar profiles and guide offers
technological tools to improve
according to the customer's
capabilities. There are really
behavior.
many opportunities for
INNOVATIVE DISTRIBUTION traditional institutions and
The rise of FinTech companies has FinTech startups to coexist. For
forced traditional institutions example, the case of the UK
to reevaluate the distribution of startup Ezbob, which initially
their products. aimed to transform the lending
segment by providing SMEs with
ACCESS TO UNSERVED/UNDERSERVED SEGMENTS
credit through its platform, but
Innovative low-cost solutions nevertheless, its innovative loan
such as robo-advisors allow approval process was praised by
companies to fi financial the banks and as of 2017 RBS is
institutions to provide among their main clients [ 10 ] .
convenient and affordable Other banks and FinTech firms
services with the ability to are making successful alliances
reach ments hitherto neglected. worldwide. The French Bank Groupe
BPCE acquired the German startup
OPERATIONAL EFFICIENCY
FiDor. As an Online Bank, FiDor
Innovative technology is reducing

10
0
 Fintech in the world: the digital revolution in finance has arrived in Mexico

is able to provide a fast and

customer-centric experience. BPCE
will use the platform to improve
its digital front. HSBC funded
enterprise data management firm
Xenomorph which performs
financial analysis. Data and
analytics are becoming become a
critical element of today's
financial services [10] .
These alliances demonstrate
that the coo Cooperation between
FinTech and traditional banks is
possible. According to a Business
Insider report, traditional
institutions Those who have
partnered with FinTech startups
expressed that the result has
been positive in terms of cost
savings, generating greater
income and creating a new image
for their brands.

10
1
 According to Finnovista, three types of collaboration are
currently taking place between financial institutions and FinTech
startups, at a global level:

ORGANIZATION

NATIONAL It refers to the creation of Fintech Associations

INDUSTRIAL (AFICO, Fintech Association Mexico, ABFintech
AND REGIONAL Brazil, Fintech Chamber of Argentina, Fintech
Association of Central America and the
Caribbean...). These actors promote collaboration
between their members and generate spaces for
dialogue and negotiation between different actors
in the Fintech ecosystem (regulators, financial
entities, startups), as well as an opportunity to
PROGRAMS learn about best practices.
AND INITIATIVES
OF INNOVATION
OPEN IN
Especially those that are promoted by financial
THE INDUSTRY
entities such as banks or microfinance
institutions, insurance companies or payment
entities. Examples of this are the Visa's
Everywhere Initiative program (a global initiative
carried out in LATAM between Visa and Finnovista);
InnovaBra Habitat in Brazil launched by Banco
Bradesco, an innovation space and coworking center
that seeks to bring together technological
startups; Spotlight, launched by Banco Santander
México, a space where innovations in digital
banking are developed and from where Banco
Santander promotes innovation in digital banking
through a creative and collaborative space; Open
Sanbdox, an initiative launched by BBVA México,
where they seek to connect with Fintech startups
LAUNCH OF OPEN that want to approach the financial institution
BANKING for the opportunity to develop and execute a pilot
PLATFORM or proof of concept.
AND OPENING OF

APIS
Collaboration programs are complemented by
initiatives Open Banking initiatives. The European
Union has been proactive in standardizing Open
Banking, establishing an operational framework
with access rules through the PSD2 guideline. In
Mexico, the Fintech Law includes the possible
adoption of Open Banking standards; Visa, through
its Developer Platform, offers open access to a
series of APIs to which any Fintech can connect.
 Customer focus

FinTech startups must know and he competition in the FinTech

T
understand well the niche they serve ecosystem to obtain and re Customer
in order to provide the best possible service is crucial. Users of
technological finance They
service. High responsiveness and
incorrectly use services from
attention to customer concerns is different firms depending on their
paramount, as word-of-mouth needs. For example, a person who
uses PayPal for business payments
recommendations are determinants
can use Venmo to make payments to
of success in this fast-paced friends. Therefore, FinTech startups
environment. must know and understand well the
niche they serve in order to provide
the best possible service. High
responsiveness and attention to
customer concerns is paramount, as
word-of-mouth recommendations are
determinants of success in this
fast-paced environment [ 21 ] .
On the other hand, many Fintech
startups are designed to provide a
personalized service to a larger
number of people. nas at low cost.
However, the human element remains
important in services. credit and
investment services. Providing a
personalized experience without a
significant increase in costs is
challenging but critical to customer
acquisition and retention for these
startups.
There are, for example, gene
users rations X and Y who quickly
adopt technology, while older
generations still need to deal face
to face with people to feel well
cared for. Therefore, FinTechs must

10
4
 Bancomext

address diverse needs by offering greater accessibility, convenience

and personalized products [ 21 ] .

10
5
 Fintech in the world: the digital revolution in finance has arrived in Mexico

According to the Capgemini 2018 Annual Report, there are six factors
that positively impact tively the customer experience when using the
services offered by FinTech startups:

PERSONALIZATION INTUITIVE INTERACTION

Personalization is achieved Intuitive interaction is achieved
thanks to the use of available through the design of processes
customer data (histó rich and in FinTech platforms, so that
from external sources), and helps clients can be guided throughout
firms offer individual services their experience, and this is
without being so intrusive. achieved thanks to technology.

FUNCTIONALITY CONVENIENCE

Functionality with innovative Convenience refers to being able

solutions focused on satisfying to provide the service at any
needs is the final result of the time, anywhere, and through any
customer experience. device, with regular hours 365
days a year.

PROACTIVE PERSPECTIVES SPEED

Proactive insights are leveraged used to re receive services

to ensure customers are prevented quickly and digitally. Any delay
from fraud as well as help them in service implies the loss of
save money. It consists of the customer, so these events
understanding customer needs in must be minimized.
advance and then offering
relevant services. If done right,
unexpected services can add value
to the experience.
The speed of service is decisive,
especially for customers who were
born with technology and who are

10
6
 Bancomext

For their part, digital financial users have different needs than when
only the traditional service existed. These must be covered by FinTech
startups, or, where appropriate, also by traditional financial
institutions. The new digital demands are [ 1 ] :

SERVICE ATTENTION INTERACTION WITH THE COMPANY

7/24 HOURS THROUGH THE WEB

Digitalization allows care services Social networks are a fundamental

to be uninterrupted. This implies space mental through which quality
that the client must have help in care can be achieved. For example,
case a problem occurs when carrying responding to a tweet or Facebook
out an operation, which helps to comment about a complaint can
increase their confidence in the improve the experience of the
sector. affected user.

SEGMENTED INFORMATION
ACCESS TO ONLINE
AND QUALITY
SERVICES

Access to online services, without online.

giving up face-to-face service: the The new digital environment is
new habits of the digital customer characterized by the elimination of
are understood as an extension of borders, which allows users to have
the current ones, and not as a access to a large amount of
replacement. Therefore, physical information in a massive and
branches continue to be a depersonalized way. Therefore,
fundamental space for customer FinTech users expect to receive

service, although operations tend segmented and quality information

to be increasingly carried out according to their priorities.

AVAILABILITY OF ALL DIGITAL CHANNELS

Access to banking services through mobile devices speeds up

operations, since the client does not have to travel to carry them
out. In this sense, having a multichannel presence is a fundamental
factor in attracting new users.
10
7
 Fintech in the world: the digital revolution in finance has arrived in Mexico

Regulation developed great experience in

dealing with banks and markets.

AND In this new

context, both
the ins
Traditional financial institutions,
such as FinTech startups, face
rience from the painful crises that
have been experienced, but they are
still in the process of building
their capacity to face the new
banking system, in which FinTech
regulatory challenges on issues of firms are the most dynamic part.
capital requirements, money
Existing rules have been designed
laundering, and data privacy and
to regulate activities and
security. For traditional financial
intermediaries and, given the speed
institutions, the cost of meeting
of transformation of the FinTech
regulatory requirements and being
ecosystem, it is difficult to
able to compete with FinTech
understand how, when, and to which
startups has always been
agents the rules can be applied
significant, since they operate
[6] .
within restrictive legal frameworks
The temptation to over-regulate
with robust regulatory burdens that
in order to mitigate all risks is
make it difficult for them to
always present. However, an ex-
achieve the desired balances.
regulation cessation would not only
FinTech startups must take precautions go against public interest blic but
would also be impossible to achieve
as the new rules impact their business given the active nature of
models innovation. Regulators should adopt
a flexible pragmatic approach in
For their part, as technology coordination with other
and innovation anticipate jurisdictions, and base their
regulatory changes, FinTech actions on continued dialogue with
startups must take precautions as the industry. In terms of this
the new rules impact their business spirit today, a large number of
models. Pending regulations in local authorities establish
various eco world's economies make innovation centres, regulatory
the difference between growth or sandboxes taries and/or innovation
lag in this industry. In general, accelerators [ 6 ] .
the task has not been easy, and the Finally, ecosystem regulators
different experiences indicate that and supervisors need to invest
all regulation must encourage resources and develop skills to
investment and at the same time understand how new technologies can
provide protection to the end user. be used. you give. A growing number
Identifying risks can be an easy of innovative Regtech firms are
task for the regulator, however, offering solutions that help banks
the most challenging step is and other intermediaries comply
designing the rules and defining with regulations and requirements.
the regulatory perimeter. appropriate sites to manage risk
Regulators and supervisors have more effectively and efficiently.

10
8
 Bancomext

In addition, authorities should technologies. The services allow us

consider researching and exploring to have significant amounts of
the potential of new technologies. information that can be analyzed to
ologies to improve their regulatory study customer behavior patterns,
methods and processes [ 6 ] . and thus ensure rar greater number
of users and their proper
retention. This information
All regulations must encourage includes users' personal
investment and at the same time identification data, as well as
provide protection to the end user. personal financial information and
even data about their health.
Data security and privacy Protecting this data and providing

AND
it to customers and third parties
In March 2016,
securely and only when necessary
the Pro
represents a challenge for
Bureau The
financiers. technological boom.
United States Consumer Financial
Therefore, in a world dominated by
Protection Bureau (CFPB) carried
connectivity of people,
out its first sation for security
organizations and even things –
issues to the online payment
internet of things (IOT) –
company Dwolla. The bureau found
vulnerabilities are multiplied.
that the company provided
they typify. Cybersecurity exists
misleading information to its
for this.
customers on the topic of
Cybersecurity is defined as a
cybersecurity. Dwolla agreed and
layer of protection for information
paid a fine of 100 thousand
files from which we work to avoid
dollars, in addition to carrying
all types of threats that put at
out certain corrective measures on
risk the information that is
its platform [35] .
processed, transported and stored
For FinTech startups, the
on any device. It involves
critical information shared across
providing robust systems capable of
devices Mobile devices are often
acting before, during and after a
lost or stolen, thus security can
loss, misuse or theft of data
be compromised. As I consumed them
occurs. The objective is to
As consumers file complaints
increase customer and market
related to data security and
confidence, minimizing any
privacy violations, FinTech
reputational risk that may have an
regulators need to develop
impact on the business. Having
appropriate measures to protect
solid cybersecurity systems is not
consumers' sensitive information
an option today. It is a demand of
from unauthorized access.
everyone: consumers, investors,
The ubiquity of da is imminent
regulators and society as a whole.
cough when services are offered
Some tools used to increase the
online and this requires security
security of any online information
and privacy measures that guarantee
system are [5] :
user trust when opting for these

10
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 Fintech in the world: the digital revolution in finance has arrived in Mexico

PROTECTION AGAINST MALICIOUS CODE MALWARE into account that threats can not
only come from the Internet, but
Also known as antivirus, it is im
also from within companies, which
dispensable for any organization,
is why the protection of
regardless of its activity or size,
communications is important.
it is also important to go beyond
dispensable when there are several
information systems matics, jobs or
offices or headquarters in various
servers, and bring together all the
parts of the world.
aspects that are related to
mobility. The large number of dis
In terms of technological security,
Different types of malware and
one of the companies that has
their evolution become one of the
managed to stand out is Keynetic
most difficult threats to address.
Technologies. This company was
ANTI-FRAUD OR PISHING PROTECTION founded by Jon Matías and Jokin
Deception has become one of the Garay, telecommunications
most used practices on the engineers. The company has managed
Internet, both to infect thousands to develop its own product that
of devices and to obtain user data. aims to guarantee the safety rity
Here there are no tools to combat in networks using a technology
these threats, you have to use called Software Defined Networking.
common sense and be wary of It is a company that has added
suspicious places. value to the FinTech ecosystem in
protection issues. tion and
BE FORECAST cybersecurity, since it allows the
These tools allow the survival of client to define which computers
the organization to be achieved by can connect to each other and for
various means. tion or company what, or who has access to each
after a security issue. Within this connected machine.
solution there are backup copies in How does a security product
the cloud or on other devices, work? cyber reality? It turns out
which keep the company's that, within the network
information safe, which is infrastructure, devices connect to
essential to be able to perform its an “open bar” model, that is, when
functions. There are also other someone connects to the network
solutions such as system recovery they can talk to everyone within
tools, which allow you to restore a it, this implies many security
system ma from a point located risks in financial technology
before the attack. topics. It is similar to when a
person enters a building and is
COMMUNICATIONS PROTECTION
asked for their official
These solutions are responsible for
identification. The officer who
protecting the organization from a
requests the information keeps
group of threats, such as denial of
track of everyone who enters the
service attacks, unauthorized
property. This software is like
access or interception of
that security guard who is
communications. We must also take

11
0
 Bancomext

verifying what and who connects to

each machine with the aim of
limiting the risks of attack by
hackers.
On the other hand, data privacy
on the Internet is understood as
the control that a user exercises
over their information to limit the
number of people authorized to
obtain it. This includes personal
data, photographs, files, etc.
Although the Internet is a tool
that allows interaction between two
or more people through different
sites, it is necessary to consider
that any action taken can have a
global and permanent impact. For
example, a publication that a
person may regret (such as a
photograph or opinion) may not only
be seen by millions of users, but
it will also be practically
impossible to delete it from the
network.

Cybersecurity is defined as a layer of

protection for information files from
which we work to avoid all types of
threats that put at risk the information
that is processed, transported and
stored on any device.

11
1
 Likewise, it can be dangerous Union on April 27, 2010, which
because publish data that can aims to regulate the right to
identify a person such as self-determination. informative
address, telephone numbers, place mining. Among some of its
of study or work, vacation days, provisions are those applicable
etc. This is even more to all natural or legal persons,
complicated if you have a large in the public and private
list of contacts you do not know sectors, both at the federal and
personally. For everything that state levels, who handle and
has been mentioned, it is of administer personal data during
utmost importance that before the execution of their
publishing something, each person activities. For example, banks,
thinks about the consequences insurance companies, hospitals,
that may arise from disclosing schools, compa telecommunications
sensitive information in public companies, religious
places and over which one does associations, and professionals
not always have direct control. such as lawyers, doctors, among
In Mexico, the Federal Law on others, are obligated two to
Protection of Personal Data Held comply with what is established
by Private Parties lares by this law.
(LFPDPPP) is a regulatory body Some practical recommendations
approved by the Congress of the to guarantee data privacy are:

1. Create a strong password and change it 5. Read the privacy policy of the applications
frequently you download

It is suggested to create a password that Before downloading an application, it is suggested to read the
includes letters, numbers and signs, and sec tion Privacy Policy and Permission Details to know what the
modify it periodically. platform is accessing.

2. Login alerts 7. Make periodic

On networks and email, you can enable this

option to receive an alert on your phone every ooo 6. Use two-factor
authentication In addition
time you log in from a new or unknown device.
to the password, it is
suggested to use other
methods to verify the
login.

3. Keep software up to
date

Having the software up to

date is essential to protect
yourself from possible attacks, since each update includes copies of the files It is essential
the latest security patches. to make a periodic backup.

8. incognito mode
4. Install a security solution
When browsing in incognito mode, all you have
Have an updated antivirus to protect yourself from known to do is prevent the browser from storing activity
vulnerabilities. linked to the sites you visited, such as search
history and cookies.
 Bancomext

GAFA: The technological giants What motivates GAFAs to enter the world of
finance?

AND In
years
recent
there
has been a
lot of talk about the so-called
impact that GAFA (Google, Apple,
Google's main incentive to get
into finance is access to data.
This company, by entering the
financial system would achieve a
Fa cebook & Amazon) will have in completely new database that it
the banking world. These can use to make its core business
technological giants are so even more profitable. In
present in our lives that it is addition, its processes would be
logical to think that they should greatly optimized, since a large
take advantage of their user base part of its income that it
and the knowledge they have of provides n your ad placement and
them to venture into banking. your customers' queries, would be
Today, they have significant increased by making your queries
investments in financial more precise and your ads more
services, typically focused on impactful.
mobile payments and wallets. If Additionally, by being able to
we add to this the advent of open verify that the customer actually
banking and what has happened in purchased the product they
Europe with PSD2, the idea of searched for online, you could
these giants putting together charge advertisers more
their financial play may not seem lucratively on a PPA (pay per
so far-fetched after all. action) basis, rather than the
PSD2 is the second Directive current PPC (pay per click)
of Ser Payment vices designed by basis. Even with its recent
the countries of the European investments in artificial
Union and that could intelligence, Google would become
revolutionize the payments an unbeatable channel ble to find
industry, affecting everything the ideal financial product, that
from the way you pay online, to is, the perfect match for the
the information displayed when client (Fintech Singapore, 2018).
making a payment. PSD2 will break Google already has its payment
the monopoly that banks have over service Google Pay, a digital
their users' data. Per will allow wallet and an online payment
others, such as the GAFA, to system that allows transactions
recover their clients' account to be made within the Apps and
data with their authorization. contactless with mobile devices.
This means that when Europeans Google's main incentive to venture
buy something on Amazon, it will
be able to make the payment for
into finance is access to data.
them, without having to be What Apple wants is for its
redirected to another service customers to continue buying
(such as PayPal or Visa) [ 15 ] . Apple. By connecting more aspects

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

of your customers' daily lives of its users with financial data

with your products, you want to that would increase the accuracy
become the way through which of ad targeting. The second is
people control their lives. that, through payment services
Therefore, the need is clear and other financial services, it
opportunity to expand its would be able to generate new
offering towards financial income streams.
services with the commitment to It is expected to aspire to
offer a more efficient and achieve a model similar to that
pleasant banking service than of the WeChat company in China
that offered today by traditional through which users can
banking. And he has discovered communicate complete many of your
that venturing into security daily tasks, from interacting
Payment ment is the way to with friends, to messaging
achieve this. Currently, it services, restaurant
constantly challenges the reservations, paying for taxi
different regulations in the services, among others. The
countries where its ApplePay success of
brand operates. And just as it
managed to eliminate the Facebook would see it feasible to
intermediation of record labels
venture into the world of finance to
and telephone companies, its
intention is to eliminate complement the information it
financial intermediaries [ 15 ] . currently has on its users with
What Apple wants is for its customers financial data that would increase the
to continue buying Apple. By accuracy of advertising targeting.
connecting more aspects of your
Tencent, owner of WeChat, is
customers' daily lives with your considered enviable to Facebook.
products, you want to become the Among the plans of this giant is
to obtain an Emoney license which
way through which people control
it has already managed to obtain
their lives. in Spain and Ireland [15] .
It can be said that Amazon
Facebook's revenue stream
already offers to be banking
basically comes from
vices. It has had consumer cards
advertisements. The more time
for many years and is currently
users spend on Facebook, the more
trying to finance the working
ads they see and therefore the
capital of many of its suppliers
more this technology company
through financial partners.
earns. There are two reasons why
Additionally, it recently
Facebook would see it feasible to
announced the launch of a co
enter the world of finance. The
account current in alliance with
first is to complement the
the JPMorgan Chase bank, which
information tion it currently has
could be an indication of new

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 Bancomext

services to come. The clients' successfully enter this new

current account will serve to industry [ 15 ] .
better understand their financial
characteristics and take them What effect would the participation of
into account when offering technology giants have on the FinTech sector?
specific products that help them
increase their sales. According to a study carried out
by Moody's, the entry of the GAFA
The checking account is therefore the into the financial market would
first step in building an Amazon definitely affect the stars
FinTech tups currently operating,
financial services platform.
including traditional financial
institutions. Both would have to
Amazon's current business
give up part of the current
model serves as leverage to
control they have in the
authenticate and know customers
distribution of retail financial
better and thus be able to offer
products and services. Under this
provide them with the right
scenario, the technology giants
financial products and services
would control most of the market,
(loans, mortgages, savings
displacing many startups out of
accounts, pensions, etc.) at the
the race, particularly those that
touch of a button. In this way,
fail to execute timely and
clients would have a relevant
efficient digital strategies. It
number of financial product
is believed that in a second,
alternatives, from which they can
less pessimistic scenario, GAFAs
select the one that best meets
will enter the market through
their needs. The checking account
alliances, acquisitions and/or
is therefore the first step in
collaborations with existing
building an Amazon financial
FinTech startups.
services platform.
In some regions of the world,
The priorities that technology
such as Asia, technology giants
giants have when wanting to
already co They began to deploy
venture into banking ca, it is
their businesses towards the
not the income they can obtain
financial sector, eventually
from it, but the millions of
positioning their services as one
clients they would reach; fully
of the clients' main resources
understanding what motivates
when making transactions. This is
these customers; access to a wide
the case of Ant Financial, an
talent network; and huge reserves
affiliated company of Alibaba,
of capital to invest. The only
which has some of the key
obstacle may be your brand. If
financial businesses in China,
they manage to overcome the
such as Alipay, Yu'e Bao or Zhima
negative effect on the market
Credit, and whose valuation is
caused by Facebook's recent
around 150 billion dollars. more
misuse of information, it is very
than Goldman Sachs. It will be
likely that they will
interesting to observe how these

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

patterns are replicated in other

economies around the world, in
the same way that it is essential
to pay attention to how the Asian
giants expand their operations
into new markets, as they are
already beginning to see signs
that show the interest of these
companies in entering the market.
emerging economies. Recently,
Chinese technology company
Tencent announced an investment
of $200 million in Brazilian
fintech Nubank.
While tech giants are
potential sources of competition
in retail financial services,
they are likely to face
significant regulatory burdens
that discourage them from
creating these types of products,
as well as antitrust measures.
However, even though they decide
not to focus their efforts on
creating tion of these basic
financial products and services
such as deposits and loans, the
GAFAs will continue to expand the
distribution and inclusion of
some financial services in their
ecosystems that will lead them to
control an important part of the
market.

According to a study carried out by

Moody's, the entry of GAFAs into the
financial market would definitely affect
the FinTech startups that currently
operate, even traditional financial
institutions.

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CHAPTER 6

Conclusion
 Fintech in the world: the digital revolution in finance has arrived in Mexico

The relationship between technology and finance has existed for

more than 150 years, so it is definitely the most digitalized industry
of all time.
The history of FinTech shows that, although technology has been a
constant for this sector, the new era we are experiencing is related
to two important factors.
One has to do with those who offer new products and services,
which are small companies, created by talented young people and
supported by technological platforms whose purpose is to eliminate
financial intermediation. traditional lines. And two, customer focus
is its primary objective and differentiator, altering traditional
products and services so that they respond in a personalized way
to customer needs.

AND The FinTech

ecosystem
made up of
startups, tech developers logical
actors, the government, clients,
active and growing segments. Both
have been strengthened thanks to
the fact that they solve imminent
problems of lack of resources and
access from the latest eco
traditional institutions and crises. economic crises that have
investment funds, works hit both strong and emerging
symbiotically to give way to economies. Its main
innovation. Additionally, it characteristic is to close the
provides the market with the gap between the supply and demand
simplification of processes, the of financial resources by
reduction of costs and the connecting those who require
elimination of entry barriers. funds or services with those who
The system works based on new can offer them, without
knowledge societies that use intermediaries involved and
digital technologies to exchange through successful collaborative
resources, interact and achieve practices.
objectives in a joint and co- As 2019 promises to be the
creative way. year of the culmination of key
At a global level, payments technologies ranging from
and remittances, as well as artificial intelligence to
loans, stand out as the most Quantum supercomputers, these are

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 Bancomext

expected to be successfully has also reached Mexico and is

deployed in the real world to presented
minimize risks, accurately
authenticate people and allow the
sector to make a quantum leap FinTech distinguishes itself by helping
towards a greater number of and empowering individuals and
clients who respond to the trust
organizations with affordable,
perceived in these innovative
financial services platforms. effective and secure services that
Most startups have indisputable foster equitable growth as well as the
technological talent that allows
achievement of some of the vital
them to maintain their business
models at optimal levels. objectives such as poverty reduction,
FinTech also distinguishes job creation and equality.
itself by helping and empowering
The collaboration of FinTech startups
individuals and organizations
with affordable, effective and with the institutions of the traditional
secure services that foster financial system causes the
equitable growth as well as the
emergence of a series of programs,
achievement of some of the vital
objectives such as poverty initiatives, purchases, alliances and
reduction, job creation and openings that strengthen the system
equality. While the United
and cover gaps that have not been
Kingdom seeks to maintain its
global leadership position, addressed for some time.
creating a FinTech startup every
hour, Singapore has a field ready as an opportunity for inclusion
to become the global center of and development economic
FinTech helped with regulation development. Mexican consumers
tailored to the needs of its are increasingly willing to use
ecosystem. Meanwhile, India and the solutions offered by startups
Kenya seek the financial that operate in the ecosystem.
inclusion of a large number of They are mainly attracted
people who today live without Experience the speed, convenience
knowing what it means to have a and transparency that platforms
savings account or access to offer. The annualized growth for
credit. India is distinguished by Mexico, combined with a low
the ease with which its mortality rate, demonstrates that
population adopts this type of it is an industry in the process
technology. Kenya is a country of consolidation. Additionally,
that was ahead of these the FinTech Law approved in March
technologies and has managed to 2018 places the country among the
reduce poverty with payment few economies in the world that
companies through mobile phones. achieve technological development
The digital finance revolution in terms of public policy. The

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 Fintech in the world: the digital revolution in finance has arrived in Mexico

law provides greater certainty increasing costs, is quite a

and legal security to investors challenge. Another of the
and users of technologies. This challenges of these ecosystems is
is a modern law that gives signs that of regulation, which has
that the Mexican Government been achieved in a still small
trusts in the talent of the number. acid of countries in the
population, since it contemplated world. The objective of
the provisional testing space
known as Sandbox, as well as the Every innovation must face certain
authorization to use
challenges as it evolves and
cryptocurrencies.
Every innovation must face consolidates.
certain challenges as it evolves
and consolidates. The innovation Achieving flexible legal
of technological finance is not frameworks that stimulate the
exempt from this, which is why it growth of the industry, but with
is indisputable. ble review full confidence that users will
latent challenges. The not suffer from fraud, is a
collaboration of FinTech startups difficult requirement to achieve.
with the institutions of the For its part, cybersecurity
traditional financial system and data privacy are critical
causes the emergence of a series points to achieve a solid and
of programs, initiatives, transparent ecosystem. rent. The
purchases, alliances and openings implementation of measures to
that strengthen the system and meet these challenges often
cover gaps that have not been conflicts with the speed of
addressed for some time. With service, cost reduction and
this, vulnerable and less convenience. promised company.
informed populations can access However, effective and
financial services in unexpected specialized software has been
ways. created for the industry that
Customer focus is the primary guarantees trust for users.
intention Mordiality of all Finally, we will have to wait to
FinTech firms. However, user see how the technology giants
acquisition and retention rios finish consolidating the
are less obvious processes than financial services they offer so
was thought, mainly for two far, in addition to analyzing
effects. The first is that users whether regulatory and antitrust
use services from different firms regulations give way to make way
depending on their needs. And the for their imminent incursion into
second is that the human element the offer of banking financial
in credit and investment services services such as such as deposits
is still important. Therefore, and credits.
achieving a balance between the
two mentioned effects, without

12
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 Bancomext

Mexican consumers are increasingly

willing to use the solutions offered by
startups that operate in the
ecosystem.

Revolution refers to a drastic

change ethical, violent and
radical of the institutions in a
society. The FinTech industry has
truly revolutionized the way
people understand and experience
financial services. These appear
affordable, convenient and
advantageous over traditional
forms. The disruptive journey
that has just begun for the
financial industry is
strengthening at a rapid pace,
and one must be willing to
embrace techno increasingly
attractive ologies, likely to
manifest themselves in the
following years.

12
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CHAPTER 7

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