Advances and challenges of the Fintech sector in Mexico

Andrés Fontao, co-founder and managing partner of Finnovista, joined us in a new Meets session where we discussed fintech regulation in Mexico, entrepreneurship opportunities in LATAM, and the peculiarities of the Colombian consumer, among many other regional realities.

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Juanjo Gómez, Marketing Director of Coinscrap Finance, had the pleasure of welcoming one of the most relevant figures in the Latin American financial landscape.

Background and emergence of Finnovista

Andrés shared how his parents immigrated to the U.S. from Spain. As the son and grandson of entrepreneurs, he spent 4 years in Mexico after completing his university studies. He returned to the country 20 years later with the Finnovista project. With a shared vision with Fermín Bueno, they propelled technological entrepreneurship, convinced that it could transform and disrupt the financial services industry.

In its early days, back in 2013, Andrés and Fermín observed how companies like Spotify, Uber, or Airbnb were completely changing the landscape of their respective sectors, and they knew that would also happen in banking, payments, and insurance. With this conviction, the startup was born in Spain, with the mission of supporting and empowering entrepreneurs in their early stages.

Specific needs of the Fintech sector in Mexico

Regulation, technology, and compliance issues make this industry a complex world. Having a deep understanding of banking and making connections is essential for carving out a future. Andrés explained that after his time in Mexico, he spent 14 years in Spain working, among others, for institutions like Bankinter. Juanjo mentioned that Bankinter is one of our investors, and we have also developed several tools for their digital bank, EVO Banco.

Finnovista initially worked from Spain with BBVA, then replicated its model in Colombia in 2013. They created a meeting point for the emerging fintech ecosystem and launched a competition to identify emerging talent across the region. There they met several Mexican entrepreneurs, including Vicente Fenoll, founder of Kubo.financiero, who showed them that Mexico was the Latin market with the greatest opportunities at that time.

Due to its size and growth potential, they considered a strategic shift towards Mexico. Andrés’ previous connections facilitated the creation of a physical office, and from 2014, they focused all their efforts on the Spanish-speaking part of Latin America.

Juanjo took the opportunity to remind the audience of Finnovista’s operation, focused on three main pillars: mentoring, advisory, and investment, which empower the fintech sector in Mexico and the rest of Latin America.

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Finnovista’s activity: supporting entrepreneurs in Mexico

The innovation firm hosts two events per year in the region to connect investors, entrepreneurs, incumbents (like Visa or BBVA), tech companies, and regulators. They also operate as a venture capital investment fund, supporting startups and injecting liquidity to enable them to have an impact in the region. Through this, they manage to boost startups from a very early stage.

Their first event found the regulator reluctant and almost fell through, but they finally became aware that fintech would happen with or without their support. Nowadays, there are nearly 1,000 startups operating in Mexico, and Andrés insisted that their innovation programs and radars are helping to raise awareness among the various stakeholders in the financial landscape.

Open innovation and collaboration: Fintech radar in Mexico

The thousands and millions of customers who have been able to benefit from this innovation motivate them to continue working alongside fintech associations, regulators, and entrepreneurs. “Our role is to orchestrate activities and remove barriers,” explained Andrés. Juanjo wanted to know the most relevant trends they have observed through their radar over these 8 years.

The most important data for Andrés is having 773 startups in the latest radar and over 200 foreign companies present in the country. This implies that, despite the geopolitical and economic situation, the fintech sector in Mexico is still growing at a rate of 18-20%. It is a mature market in constant evolution, and the main challenge remains financial inclusion:

Andrés Fontao, Co-founder and Managing partner of Finnovista

Digital applications and tools are making a difference in their lives. “The trends we have seen this year have been, first, the rate war to attract customers. Secondly, the issue of banking opportunities and reducing that gap. Lastly, there is the lack of available capital, which has hindered the growth of fintech. However, this has translated into greater discipline on their part, being able to reach profitability thresholds at earlier stages and be more creative,” he concluded.

Hope remains for regulatory advances in Mexico

This increased synergy within the industry translates into further development in credit and payment solutions, which are the most basic services for users and businesses. In the past year, open finance has been prominent. There is confidence that this will be the year of open banking in Mexico thanks to regulatory developments. Technological platforms that can be consumed by large companies will allow them to offer financial services, whether it’s an Uber or a Walmart.

Furthermore, BNPL is an alternative to lending that is beginning to take off in the country due to the fintech offering and consumer demand. Juanjo took the opportunity to point out that the underbanked population makes traditional scoring systems less useful and necessitates more inclusive alternatives. He then introduced the role of the regulator as a facilitator of the fintech ecosystem.

Andrés explained that Finnovista remains on the sidelines but always with the intention of encouraging the creation of a regulatory framework capable of driving the advances proposed by hundreds of entrepreneurs: “Now it’s time to improve and evolve a configuration whose main beneficiary is the user.” They advocate for the evolution and creation of a structure that promotes inclusion and innovation.

The real challenge for the fintech sector in Mexico

In the final part of the conversation, Andrés explained how the Colombian consumer has special habits and needs, so foreign startups must adapt radically and manage the business on-site. B2C has become much more sophisticated in recent times, and we will see how Finnovista can be the strategic partner for developing successful activity in the country.

To the traditional question from our Meets: What do you think will be the technology that will change the industry in the next 5 years? Andrés wanted to respond indirectly:

According to our guest, technological developments must take into account the people who work in their creation and also the users who consume them.

With this idea of personalization and humanization, we bid farewell to Andrés, thanking him for his generosity and time. Juanjo congratulated him on his work, and we hope to talk again soon with him and his fantastic team.

See you soon!

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