There are still challenges that fintech companies must face, but let’s look at the data and an expert opinion.
4 min read
Opinions expressed by Entrepreneur contributors are their own.
Fintech companies have become an alternative for users, whether they are banked or not. The former have found better conditions to request loans in this type of company, while the latter have taken advantage of a model that allows them to finally access the financial system.
In several respects, the financial technology industry begins to gain ground in the banking market. First of all, fintechs are a great option for a large part of the population due to their accessibility. This is important, since according to figures from the National Banking and Securities Commission (CNBV) , only 76.5% of the population has access to a branch less than four kilometers away.
In this sense, according to figures from the National Survey on Availability and Use of Information Technologies in Homes (ENDUTIH) of 2019, 86.5 million Mexicans; that is, 75.1% of the population over six years of age has a cell phone.
If we take into account that only 47% of the adult population has a bank account, according to INEGI, a digital financial solution, such as fintech, can be an alternative to access products and services in places where there is no necessary physical infrastructure.
SMEs look to fintech
During the pandemic, several sectors were left unprotected. Small and medium-sized enterprises (SMEs) are in this group. This type of business was affected by the economic effects of the health emergency and did not find support in traditional banking. Data from the National Institute of Statistics and Geography (INEGI) reveal that one million 10 thousand 857 businesses closed their doors definitively in 2020.
Furthermore, according to Banco de México (Banxico) , 79.2% of companies did not use new bank loans in the first quarter of this year. Among the main reasons for not requesting it were less favorable conditions of access to credit and higher costs.
At the height of the pandemic, banks were no longer an option for this type of business. According to BBVA Research figures, during April 2021 there was a contraction of the credit granted to the private sector by commercial banks of 8.8% per year. This is the largest drop since the downward trend began in May 2020.
Fintech companies, in this scenario, have capitalized on this customer demand for credit by offering greater facilities to access this type of financial product, in addition to giving lower interest rates.
Will fintechs dominate?
Fintech companies have made a big splash and are certainly looking to overtake traditional financial institutions in the banking market. The accessibility to these types of platforms and the facilities to access their products certainly give them an advantage.
The Fintech Mexico Association points out that in our country 4.6 million people or companies already use a solution based on financial technology and it is expected that by the end of 2021 this figure will reach 9.2 million users.
The growth of this industry is undeniable. However, there are still some challenges ahead. One of them is connectivity: it is not enough that most Mexicans have a cell phone. To open and manage a digital account they also need to be connected to the internet.
Mistrust and ignorance are other aspects to overcome for these companies. There is still uncertainty in a sector of the population regarding these alternatives to traditional banking. Another large percentage have not even heard of fintechs. In order to position itself as the first option in the Mexican banking market, it is important that the industry faces these challenges.