NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

By Brian Riley

Mexican banking regulators have little to say on the progress of CoDi, the digitalization of the Mexican payment system that kicked off in 4Q19.  The market has been cautious, as Standard and Poor’s noted a recent market review:

One board member of startup association Fintech Mexico called it a “great idea” being “poorly implemented.”

On the one hand, the concept of the free-to-use CoDi system is winning praise as an effort to address longstanding issues of financial informality in Mexico, where the vast majority of transactions are still in cash. According to the country’s 2018 national financial inclusion survey, 87% of adults used cash for purchases above 500 pesos. The figure was 95% for smaller transactions.

We await some core metrics.  In Mercator’s recent review of the LATAM market, we noted three issues.  The success of closed loop firms has the potential to disintermediate traditional players from the market.  Fraud rates are among the highest in the world and the lack of political stability creates a unique problem for financial inclusion.

Photo courtesy of PresidenciaRD.