- Open Finance Mexico 2024: In the country, the seven largest banks control 76.3% of financial assets, making their participation essential for the success of the Open Finance ecosystem.
- In Mexico, only 47% of users are willing to share their financial information, reflecting a key challenge for the adoption of Open Finance.
The Open Finance ecosystem in Mexico faces significant challenges in 2024
According to the Fintech Mexico 2024 report prepared by NTT Data, in which José Luis López Amador, CEO of Finerio Connect, participated by analyzing the state of Open Banking and Open Finance, the Open Finance ecosystem in Mexico is facing major challenges in 2024.
Despite being a pioneer in enacting the Fintech Law in 2018, the implementation of Open Finance has been limited due to the lack of clear secondary regulations. There are three crucial challenges for this system to take off in the country:
- Secondary regulations: The publication of these regulations is essential to establish the rules under which financial entities must operate.
- Incentives for adoption: Regulators must create a favorable environment for financial institutions to quickly adopt the new regulations.
- Data sharing culture: The Mexican population remains hesitant to share their financial information. It is crucial to educate them about the benefits of data sharing to improve access to personalized financial products.
Regulation and challenges of Open Finance Mexico 2024
The Fintech Law, passed in 2018, promised a clear framework to foster financial innovation in the country. However, since the publication of Article 76 in that law, only one general provision has been issued in March 2020, directed at Credit Information Societies (SIC) and Clearing Houses. This has created a regulatory vacuum that hinders significant progress in Open Finance in Mexico.
Although financial authorities expressed a favorable stance towards creating these secondary regulations in 2023, the political and electoral environment in the country has slowed progress. With elections on the horizon, it is unlikely that regulations will be implemented in the short term, further delaying the adoption of Open Finance in Mexico.
Other countries in Latin America have made considerable progress in implementing Open Finance. Brazil, for example, enacted its legislation in 2020 and has seen notable growth, reaching 43.12 million active consents to share data by February 2024. Chile and Colombia have also been developing their Open Finance models, demonstrating a more proactive approach than that seen in Mexico.
In Argentina, a country that still lacks an Open Finance law, APIs have been launched to facilitate data sharing among companies, such as Bind, which handles 70 million API calls monthly.
These international advances suggest that Mexico can learn not only from the successes of other countries but also from their mistakes. The country has the potential to develop a more robust Open Finance framework tailored to its local needs.
Opportunities for Mexico: A positive future
Mexico can regain its leadership in the field of Open Finance if decisive actions are taken. Key steps include:
- Learning from abroad: Adapting international best practices to the specifics of the Mexican market, taking into account success stories from Europe, Brazil, and the Middle East.
- Development of local APIs: Financial solutions in Mexico must focus on specific national issues, such as the lack of financial inclusion and limited access to banking services in rural areas.
- Incentives for cooperation: The Mexican model should avoid replicating the European approach of penalizing banks. Instead, incentives should be created for financial institutions and Fintechs to collaborate actively, fostering an innovative environment.
- Shared infrastructure: Creating a central Open Banking hub that allows banks and Fintechs to share infrastructures and reduce costs, maximizing efficiency and enabling faster development of APIs and innovative services.
Adoption and Data sharing culture
A critical aspect that Mexico must address is the lack of trust among users regarding the sharing of their financial information. According to recent studies, only 47% of users in the country are open to sharing their financial data. The main concerns stem from a lack of financial education and fears of misuse of their information.
Those willing to share their data tend to do so with transactional information and credit-related products, preferring to receive tangible benefits in return, such as financial planning advice or personalized products.
Resistance to sharing information is particularly strong among low-income individuals, specifically 52% from the D+/D socioeconomic level. Additionally, 31% of respondents unwilling to share their data are over 55 years old, indicating that younger population segments are more likely to adopt Open Finance.
Despite the challenges, there are already some success stories in the country. Companies like Finerio and Belvo have begun collaborating with financial institutions, helping them improve data aggregation and offering more accurate credit scoring engines.
In particular, Belvo has integrated alternative data sources such as IMSS and SAT to provide a more comprehensive view of users’ financial profiles, allowing financial institutions to make more informed decisions regarding credit and other financial products.
It is important to highlight that in Mexico, the seven largest banks control 76.3% of the assets in the financial sector. Without the active participation of these institutions, any attempt to promote Open Finance in the country will be limited. This reinforces the need for clear regulatory incentives and a shared infrastructure that enables effective integration of these large institutions with emerging Fintechs.
Where is Mexico headed?
In the context of Open Finance Mexico 2024, the country faces a crossroads. While other countries rapidly advance in adopting open financial systems, Mexico has fallen behind due to the lack of clear secondary regulations and adequate incentives.
However, the potential for growth remains immense. With the right regulatory framework, efficient shared infrastructure, and a focus on local needs, Mexico can not only catch up but also become a global leader in Open Finance. To achieve this, cooperation between the public and private sectors will be key, along with a concerted effort to educate the population about the benefits of securely and responsibly sharing their financial information.