Mexican Neobanks, who is the leading Neobank in the market?
Mexico is the Fintech leader in Latin America with more than 700 FinTech in a variety of sectors. Legal Paradox, S.C. has developed a Fintech Map in which we highlight each FinTech sector per State within Mexico (more information here). From the above, we can see that neobanks, fintech challenger banks or wallets, are in full growth in the fintech ecosystem despite the covid 19 pandemic or thanks to it.
In this article, we are going to describe this Mexican FinTech, their characteristics, pros, and cons, so you can decide and choose the "One" that best suits your needs.
¿What is a Neobank?
This type of FinTech, unlike a traditional bank or incumbent banks, is a new type of digital-only that exists without any branches. they are reinventing the practices and processes associated with customer acquisition, banking services, or traditional banking (more information here).
For example, they have Apps that facilitate digital banking, the administration of accounts and credit cards. They rely on their neobank customers to have a traditional bank account, with the underlying bank license, to offer a user-friendly interface that can generate greater financial inclusion and digital payments.
This sector is set for huge potential growth worldwide and even more so in Latin American countries like Mexico.
Disclaimer, it is important to comment that the connotation "Neobank" is used in this article in its globally accepted conception and not as a regulated bank for purposes of the applicable Mexican regulation. It is important to mention that even the term "bank" is of reserved use for entities authorized to operate as such.
¿Why Mexico is a top strategic location among Latin American countries and emerging markets for this type of FinTech? (more information here)
Mexico counts an estimated 42 million unbanked customers (more information here), and only about one-third of small and medium-sized businesses have access to banking loans.
In addition, Mexico is a prime country for FinTech due to its favorable regulatory landscape and consumer demographics as Mexico enjoys an exceptional demographic bonus of millennials (more information here) who love immediacy and online services, hence the resounding success of eCommerce activities, as well as companies like Uber, Spotify or AB&B in the region.
Mexico is digitally engaged – which could make consumers receptive to this new type of player. Mexico has a consumer Fintech adoption rate of 72%, among the digitally active population (more information here). The median age in Mexico is 28 (more information here), while 41% of the population is 25 to 54 years old, creating a wide base of young customers. In 2015, the adoption of smartphones was 50% in Mexico, by this year the adoption of smartphones increased to 70% (more information here). In addition, Mexico has sophisticated payment systems administered by our Central Bank (Banxico) such as SPEI and Codi making possible a real-time wire transfer.
It is important to mention this players has the opportunity to reduce the gap and provide financial inclusion. In this sense, financial inclusion or exclusion is measured from two perspectives, that of financial service providers and that of users. From the perspective of the provider, inclusion or exclusion has to do with market penetration, infrastructure, supply, etc., but the one that seems to us to be most relevant is that related to the users, that is, the use that people make of financial services.
In that regard, we are sure that you all have seen endless lines of people at ATMs every fortnight to withdraw their money. Why do they do this? The easy answer may be that users do not see the added value of having their money there. Here, it seems to us that this fintech startup has captured the clamor of the people offering multiple benefits that make having your money somewhere really worthwhile. Below we will compare some benefits offered by them in the region.
From a legal perspective, what type of fintech company are they?
A so-called Neo Bank, Neobank, challenger bank, digital bank or digital only bank, operates in Mexico as a Wallet. A wallet is a financial institution set at our Mexican FinTech law as an Electronic Payment Fund Institution and to date, there are 59 applications to operate as it and only one authorized (more information here).
Who is the leading one in Mexico?
Although it seems to us that the Mexican startup ecosystem is just beginning and the development of this type of FinTech is still incipient, there is already an interesting offer in Mexico supported by seed funding, crowdfunding, and even by the most important VC. The mexican market will only continue to improve with the arrival of giants such as Revolut (more information here) and other digital only banks, here are some players for you to deep dive and choose which is currently the leading in Mexico.
1. Cuenca (more information here)
Founded in 2018 by the entrepreneur Matin Tamizi (more information here) in Mexico City, Mexican neobank Cuenca is seeking to help with financial inclusion within the Mexican Society. Matin Tamizi wanted to create a financial product for the 60% of Mexican who can´t access financial services and do not trust financial institutions. Cuenca closed 2018 with more than $2 million dollars from investors and initiated 2020 with $9.6 million dollars series A.
Cuenca is a great FinTech, it has a lot of characteristics like being OpenSource, but for us, the most important is that it generates financial inclusion in only 90 minutes. This app is for everyone, not only Mexican citizens, after applying and performing the onboarding process you already have a virtual card, but if you wait just 90 minutes you can get the physical card to wherever you have requested (only if you are in Mexico City and have made a minimum deposit of 50 Mexican pesos). What a beauty of logistics, I´m sure traditional companies would die of envy, if only they knew. These are part of the reasons why at the date of publication they already had more than 100,000 customers.
Also, Cuenca has a lot of alliances with indigenous communities in Mexico and the company Someone Somewhere (more information here) that helps communities by giving them some part of the utilities for their work. When your Cuenca card arrives, they give you a woven cover for your card that has been manufactured by an indigenous community.
2. Albo (more information here)
Incorporated in 2016 by a young team, Mexican challenger bank Albo seeks the help of technology and creativity to clear and simplify processes in order to help you to receive, transfer, and spend your money freely.
Their purpose is to improve the quality of life of Mexican Society, by passion, total honesty, and integrity. In 2019, Albo secured a $19 million dollars extension to its Series A financing, led by U.S. based Valar Ventures. This FinTech previously raised $7.4 million dollars at the beginning of 2019, bringing the company´s total Series A funding amount to $26.4 million dollars (more information here). In 2020 Albo secured an investment of US$45M from Mountain Nazca, Greyhound Capital, and Flourish Ventures for expansion (more information here).
As users, we are pleased with this debit card as its UX is clear, minimalistic, intuitive, and very easy to use. The security for entering this neobank account is by fingerprint, face recognition or a PIN and they even have a product for SMEs (Small and medium-sized enterprises) called Albo for business.
3. Klar (more information here)
Founded in 2018 in Mexico City, Klar is a financial technology company that gives you full control of your money through a mobile application and a debit card that has the benefits of a credit card.
Klar is an interesting FinTech as you get to open your account in 3 minutes tops, also they have a lot of benefits that are common for credit cards (i.e. they give you 1% cashback for all your purchases with Klar debit card and they pay you cashback at the first day of the month).
Klar just makes a big change on their platform and come up with a new, minimalistic and sophisticated design. You can also appreciate Klar´s new design on the main picture of this article.
4. Fondeadora (more information here)
Incorporated in 2011 as a Crowdfunding platform in Mexico City, Fondeadora was sold to Kickstarter (more information here) in 2016. In 2018, the original founders started Fondeadora with the purpose to give access to the financial system in a free and 100% digital way.
The Founders of Fondeadora are Norman Müller (more information here) and René Serrano (more information here). Fondeadora raised $8 million Mexican pesos through Propeler, a Mexican crowdfunding platform (more information here), to create the wallet and they did it again in 2020, and during Covid 19 pandemic, with a success rate of 240% on their second series (more information here). In addition, Fondeadora raised $14 million series A round led by Gradient Ventures (Google Fund) (more information here).
As users we think the best word to describe Fondeadora is “Digital”, this Challenger Bank wants to dominate the digital atmosphere by doing a lot of noise on social media. The platform is clean and sophisticated, they have an excellent UX too, and the front end is just magnificent, clean, minimalistic, and modern.
Recently, Fondeadora announced an impressive merger with Mibo (former Weex) (more information here). This was a logical move considering Mibo had 1 million downloads on their app, more than 100,000 debit cards issued, more than 3,000,000,000.00 Mexican pesos in deposits, and more than US25,000,000.00 raised from investors.
Fondeadora is about to launch new features including an enterprise account for SMEs called Fondeadora Negocios and a metal card for their best clients. Looking forward to it!
5. SWAP (more information here)
Incorporated in 2014, SWAP makes transferring money as simple as sending and receiving a text message for its users – with or without a traditional account. Swap is Mexico’s most-used digital peer-to-peer (P2P) payments platform, as well as a facilitator of mass cash disbursements for business clients.
The Founder is Bruno A. Ramos Berho (more information here).
SWAP was created as a friendly and transparent financial solution without having to go to an establishment. Bruno wanted to make the payment experience as simple as possible by keeping all your debit and credit cards in one SWAP card and by making P2P payments using a special keyboard on WhatsApp, Facebook Messenger, Instagram, iMessage, and also by SMS.
As users, we think the best word to describe SWAP is “practicality”, SWAP makes it simple, makes the experience of P2P payment fast and easy for its users and it is fantastic to hold only one SWAP, as Swap Card can be linked to any other card, so you only need to carry one.
They have a high-security standard by tokenizing and encrypt all user information and then keeping those tokens in certified servers PCI DSS level 1. They use PIN and biometrics for making transactions
6. Enso (more information here)
Incorporated in June 2018, its first product was launched in May 2019, is a wallet that allows peer-to-peer money transfers with no transaction fees involved.
The company has been focusing on efforts to provide the best Mexican financial services. In February 2020, the company launched a no-fee savings account linked to a debit card that allows customers to spend and withdraw money anywhere they like. To date, Enso has committed capital from private investors.
The Founder is Rafael de la Parra (more information here) and the main purpose of Enso was to bring financial inclusions to adults that do not have any financial product.
As users, we think this debit card is meant to be an excellent financial management app for a variety of people that want to make joint payments or joint savings accounts.
7. Nelo (more information here)
Founded in April 2019 in Mexico City, Nelo develops a mobile application for financial transactions.
With Nelo you can send and request money from friends, family or anyone, without using a CLABE account. You can pay people and companies that don't have the application through SPEI, and best of all, it doesn't cost.
They recently change the design of the platform for a more minimalistic UX and added a new credit service called "CrediNelo" in which they can borrow up to $10,000 Mexican pesos, you can set the payment plan according to your payment capacity. Also they have a feature called "nombre Nelo" in which they give you a nickname on the platform for inter-user deposits without the need of giving your information.
8. Flink (more information here)
Founded in 2017, Flink is a FinTech developed in Mexico that offers a modern and reliable technological platform, from which you can open an account for your money in just a matter of minutes. Flink allows users to own a digital account and complete transactions via a physical debit card. Apparently, these users also want to invest. And they’ll be able to do it now.
People are able to place their money on familiar and beloved brands such as Netflix, Disney, Facebook, Coca-Cola, Tesla, and many more. While the normal price for one share for such titans is very expensive, Flink will allow users to buy “shares of shares.” (more information here).
Likewise, another selling point is that Flink charges no commission to handle these investments.
As users, we think Flink is a very useful app, it has a variety of services and it will be expanding to a Stock Exchange Market. We think this is a very powerful FinTech but there are lovers and haters of their UX and Front end.
The Founder is Sergio Jimenez Amozurrutia (more information here)
Flink added a new type of service known as “Presupuestos”, this service enables a budget within your account for specific payments you want to make, so there is a limited budget in order to keep your expenses in control and have savings goals on a monthly basis.
9. Nu (Nubank) (more information here)
Founded in 2013 in Brazil, Nu is the leading financial technology company in Latin America, with more than 20 million clients. Its first product, launched in 2014, is a no-fee credit card that is fully managed by a mobile app and used by more than 12 million customers.
In 2017, the company began testing its personal loan service and began its international expansion to Mexico and Argentina. To date, Nu has raised around $820 million in seven rounds of equity investment by TCV, Sequoia Capital, Kaszek Ventures, Tiger Global Management, QED, Founders make deposits to, and more others.
Nu was recently chosen as the most innovative company in Latin America and ranked no.36 of the most innovative fast-growing companies.
Nu shows their commitment to the UX and features of their platform and they acquire Plataformatec, a Brazilian consulting company because it wanted to tap into its pool of talented engineers and developers (more information here) and also, they acquired Cognitec, a U.S. Software Firm (more information here) for enriching their software and technology departments.
Nu made an alliance to offer interest-free months for purchases made in Amazon Mexico, Paypal, and Clip, giving a huge benefit to their users. Also, they add a new function to pay your credit card, they integrated with SPEI for immediate payments.
As users, we think the credit card of Nu is disruptive and powerful, this kind of product will open the door for players around the World to come to Mexico to compete.
10. Bnext (more information here)
Founded in 2016, in Madrid, Spain, Bnext is a FinTech specialized in digital financial services.
Crunchbase defines Bnext as the first supermarket for financial products, it reflects a new way of banking that challenges traditional banking from its foundations.
With Bnext users can do almost everything they do with a bank, without having to use them. It allows them to create their own current account in a matter of minutes, with nearly all the functionalities of an account in a Bank. Additionally, users can include their external accounts and hence have all their financial information on a single platform, regardless of the provider.
However, the real innovation in Bnext lies in the access to a wide range of financial products. The offering suppliers are meticulously selected in order to best fit the client's needs.
On the platform, the user can scan through all different products, purchase them, and control his acquisitions, all without ever leaving the app. Instead of charging the customer endless commissions and trying to sell as many products as possible, Bnext has developed a model that allows them to really collaborate with the fintech and get the best available offers on the sector. Their fintech portfolio to date includes real estate investment firms, mutual investment funds, loans and crowdlending, microloans, or crowdfunds. Bnext is progressively integrating the most leading products to expand the offer and thus become the first FinTech without balance.
Fintech startup Bnext has raised a $25 million round. The Spanish company is building a FinTech product and has managed to attract 300,000 active users. Bnext started its expansion in Mexico City in November 2019, it has the objective to offer not only a debit card but investment services, credit card, insurance, and more.
They recently add many services using other FinTechs. For example, they offer a new credit service using Kueski, an investment feature using Briq and Dinn, car insurance with Crabi, etc. They also add a new impressive feature for its users called "Chat de Salud" in which you can receive quick medical consults from nutritionists, personal trainers, allergists, cardiologists, pediatrics, and many other medical specialties. This service costs $149 Mexican pesos each month.
11. Rappipay (more information here)
Incorporated in 2015, and not satisfied with the delivery industry, Rappi, the Colombian Unicorn, is adding more options to their products. Hoping to become a “super app” for users to perform their basic needs.
Regarding Mexico, Sebastián Mejía, co-founder of Rappi said that “in response to the needs of the region, we created RappiPay, an option that leaves behind the cash, credit cards and signatures, we will allow Mexicans to make purchases in the most important shops in the country, request money and even withdraw cash by means of a QR code from wherever they are”.
RappiPay works like a bank, where the user can manage their money, send and receive deposits, split accounts between two or more people as well as collect money to buy and pay at all Rappi’s partner stores, only with the use of the cell phone.
When scanning through the cell phone the QR code that will appear in each associated establishment, the user will know the value of the purchase on the screen of his mobile, and it will only be necessary for the client to accept the amount to pay to make the payment, which will be deducted from your account.
This technology in addition to providing ease of payment method also offers greater security to users, one of the limitations for the growth of eCommerce in the region.
As users of Rappi, there are no words for describing this Colombian super-app, we think that it´s expansion to the Fintech sector was imminent.
Also, recently we have been chosen as beta testers for their new credit card, it has an incredible design and a lot of incredible features. We add a specific chart of fees to this product too.