It’s not every day that U.K. fintech companies get a chance to meet with key Mexican stakeholders and decision makers in the industry. I was proud to lead the delegation of six U.K. payment technology companies to showcase their expertise at the PayExpo Americas 2017 Summit in Mexico City earlier this month.

Financial services stands as one of the most dynamic sectors in the Mexican economy — about 22 U.K.-based companies in the country, for instance, are involved in fintech. Those companies range from the largest U.K. investors in Mexico, such as HSBC, to smaller consulting firms providing niche services in the financial services sector.

Mexico’s SMEs make up nearly 95 percent of all companies in the country, generate 52 percent of the national GDP and employ 72 percent of its population. According to the World Bank, the lack of capital available to SMEs affects economic growth by maintaining low levels of productivity.

Among the pillars of the Mexican government’s new financial inclusion strategy is the promotion of digital technologies to provide broader access to financial services and the substitution of cash for electronic payments. In Mexico, the lack of flexibility from commercial banks to provide instruments for SMEs and entrepreneurs, gives fintech companies commercial opportunities in retail banking and payments. According to U.S. think tank Finnovista, there are 140 fintech startups in Mexico, primarily focused on e-payments, loans, financial education and personal finance.

Fintech regulation is currently being drafted by Mexico’s Ministry of Finance (SHCP), in collaboration with the National Banking and Securities Commission (CNBV) and the central bank (Banxico). This new fintech bill, which has been passed back and forth for many months, now has a sudden urgency to be finalized based on presidential developments in neighboring USA.

Standing-Room Only
This was the first conference I’ve ever attended where every seat for every session was taken. The interest and attitude to learn and understand about the best practices from fintech around the world was overwhelming.  Even the private meeting I had with the Mexican Finance Minister and his team, thanks to the Department for International Trade, was open and frank. It was apparent that they are eager to learn from the best practices of the U.K. Financial Conduct Authority.

My personal thoughts are that the Mexican market has everything—the market size, the interest and the right attitude. There is only one thing missing and that is the very fundamentals of what fintech represents. Fintech companies in Europe have grown by solving the problems that the incumbent providers have not been able to solve; this has been the backbone to the sector with innovation stemming from problem-solving.

What I saw in Mexico was a real desire to be part of the fintech movement with both entrepreneurs and banks wanting to have a piece of the fintch cake. It’s my belief that they should not merely want to join the fintech movement but rather they should be considering what problems they face that fintech can solve. For example, of the five largest banks I spoke to, at the newly formed Fintech Hub, only one of them asked me about how fintech could solve the issues of migrant Mexicans in the U.S. trying to send money back home to Mexico. Opportunities to explore solutions to this obviously large problem need to be looked at from all possible options including partnering with a U.S. bank.

I believe Mexico has the potential to become a hotbed of innovative financial services because of the welcome we received and the eagerness with which regulators, banks and startups are soaking up information about best practices from abroad. To tap this opportunity, they must ensure they’re looking at fintech not just as a shiny new investment but rather as a chance to solve real problems.

Suresh Vaghjiani is Managing Director at GPS.