Capturing Digital-First Businesses In Mexico

Digital payments providers and FinTechs have flocked to Mexico in recent years, inspired to enter the market by Mexican consumers’ growing use of online channels. Cash has long dominated the country’s payment ecosystem, but the pandemic pushed consumers to experiment with digital payment methods such as credit or debit cards, Mariano Carranza, chief financial officer of Mexican-native digital payments and commerce platform Clip, said in a recent interview with PYMNTS. This, in turn, increased businesses’ interest in supporting cards and other emerging digital payment methods, rapidly accelerating digital payments adoption within the country. 

“During the pandemic, a shift in customer behavior occurred that we think is here to stay: Customers are more willing to pay [for] their everyday purchases with cards,” Carranza said. “Businesses were equally compelled by customers to start adopting card payments, as government lockdowns often forced them to operate online.” 

Offering consumers innovative payment experiences both in-store and online is becoming an imperative for Mexican businesses. As more competitors emerge, competition has increased and merchants are recognizing that they must offer compelling payment experiences to stand out. This trend, in turn, represents an opportunity for payments and financial services providers such as Clip. 

Keeping Pace With Shifting Consumer Behavior

Capturing consumers’ attention in Mexico’s increasingly digital market requires merchants and their would-be payments partners to understand how swiftly consumers’ needs and preferences have changed and why. Cash has remained a dominant payment method for decades, and only recently has this begun to shift as consumers make way for plastic credit and debit cards as well as digital-first payment tools such as mobile wallets. 

The pandemic’s impacts have altered legacy ways of thinking, Carranza explained, inspiring consumers to move away from cash and demand that their favored merchants accept debit or credit cards. Data from Mexico’s National Institute of Statistics And Geography (INEGI) revealed that the segment of the population making card payments grew from 12% prior to the pandemic to 52% by the end of 2021, showing just how rapid the move away from cash has been. 

“Consumer habits have also been hard to change, but the pandemic has really helped accelerate this,” he said. “For example, it has taken time for people to realize that they don’t need to go to a branch to open a bank account or execute a simple transaction or that they don’t need to touch cash to make a payment.” 

Staying on top of changing payment methods also is imperative for businesses, and merchants now understand that they must support a variety of emerging payment options rather than just cash or even plastic cards. Growing smartphone penetration within Latin America — about 70% of the region’s population now has access to mobile phones — has made mobile wallets and virtual payment apps increasingly popular. However, there still are several challenges, such as innovations to digital payments infrastructure, that must be met within the financial industry before businesses can implement these tools at scale. 

“Another element that needs to improve is the infrastructure for online [or Card-Not-Present] CNP payments,” Carranza said. “Today, [CNP] acceptance rates in Mexico are significantly below average, partially due to [the] lack of systemwide investment in risk management tools.” 

Mexico’s businesses are working to find tools and services that can help them juggle the growing number of unique payment methods they must offer without causing friction. This represents yet another opportunity for the industry’s financial players. 

Winning the Next-Gen Payments Game

Competition to capture the attention of the country’s customers is becoming fierce for payments players looking to set up shop within Mexico. The country’s rapid digitization and the rising familiarity with online banking and payment solutions mean consumers quickly have become spoiled for choice. Those that already have the infrastructure in place may have a clear competitive advantage over players that recently entered the market, however. 

“Now customers can choose from a variety of digital wallets, credit cards, digital loan [or] payments providers. … All [of] these products are gaining traction fast,” Carranza explained. 

Keeping pace with how consumers are tapping emerging digital payment methods and how their financial needs and preferences may continue to change, therefore, is key for payments players in Mexico.