- Fintechs grow in Mexico and so do frauds
- The law seeks to regulate financial institutions, is it enough?
- What measures should be taken to avoid electronic frauds?
- Validating users correctly is a necessity
The rise of modern technologies for electronic payments has led to the emergence of companies dedicated to providing financial services in a digital framework, the so-called Fintech.
The term is very simple to understand, Finance + Technology in English, a relatively new, growing sector, which in Mexico is becoming very relevant, especially since the beginning of the pandemic.
Mexico became the country with the highest download of financial apps in Latin America and number seven worldwide between the first quarter of 2019 and the same period of 2021, according to the Fintech App Marketing Insights: LATAM Edition 2021 report by Apps Flyer.
But much growth also attracted the attention of organized crime, which placed Mexico as the country with the highest risk of ecommerce fraud worldwide, above countries such as Russia and Brazil.
Data from the Association of Internet MX indicate that from 2018 to 2019 electronic fraud in Mexico grew from 25 to 40% but from 2019 to 2020, during the confinement rose to 400%, scandalous figures that coincide with the analysis of other firms that ensure that from 2020 to 2021, the figure continues to increase, 72% representing greater growth in fraud than in e-commerce itself.
Although the federal government reports a 5% decrease in cyber fraud cases, there are still almost four million claims reported by Condusef as of the second quarter of 2021. A sign of the lack of adequate protocols.
Fintech detonates in Mexico
The reason for the accelerated growth of the consumption of financial apps in Mexico is normal, the pandemic and the confinement, forced people to seek digital alternatives, contactless to conduct business, payments and purchases.
Sectors such as investment increased their interest due to the great activity in stock markets, growth in the use of cryptocurrencies and downloading of crowdfunding applications or crowdfunding institutions. New normal, new way of doing business.
The digital acceleration of 2020 radically transformed the way consumers interact with Fintech and traditional financial institutions. Mindsets changed, with even the most skeptical jumping on board the digital economy. Adopting biometric identity validation methods to conduct transactions from their device.
Fintech challenges for 2022
Today’s customers are looking for a 100 percent digital experience for managing their finances, mainly from their cell phones. They want it to be secure, error-free and constantly innovative.
The industry evolved faster than the infrastructure needed to get the maximum benefit from the use of financial technologies, the future has reached Fintech in Mexico and more and more companies dedicated to the sector are emerging.
Having your money or your investments in the palm of your hand in a safe way is something that the population demands, the interest in the use of cash and its exchange in stores and establishments is decreasing. It is essential to avoid frauds and Fintechs bet on the correct validation of the people who carry out financial transactions.
But there is one more challenge: to favor the inclusion of financial services in sectors of the population that are not yet integrated to the use of new technologies, taking advantage of the growing use of the Internet since the pandemic and the simplification of the processes to apply for credits or loans granted by Fintechs.
The security and legal framework of Fintechs
To give legal certainty to the services provided by Financial Technology Institutions (ITF), as the companies in the Fintech sector have been catalogued in Mexico, the Mexican government published the Law to Regulate ITFs or better known as the ‘Fintech Law’.
The National Banking and Securities Commission is the governing body of the ITFs, it is necessary to complete a validation process and once approved, wait for the official document to be published in the Official Journal of the Federation (DOF). There are not many companies currently validated in two main areas; Electronic Payment Funds Institutions and Collective Financing Institutions.
For electronic payments, on April 22, 2021, the DOF accredited six companies:
- Broxel Vales, S.A.P.I. de C.V., (BRS Payments).
- NVIO Pagos México, S.A,P,I, de C.V.
- Trafalgar Digital S.A. de C.V.
- Tu Dinero Digital S.A. de C.V.
- BKBN S.A.P.I. de C.V.
And three more for the area of crowdfunding:
- Fundary S.A.P.I. de C.V.
- Likideo MX, S.A.P.I. de C.V.
- BXL Fintech, S.A. de C.V.
On October 22, 2021 Broxel announced that it will be part of the Binational Council of the United States-Mexico Chamber of Commerce, with the objective of fostering a quick adaptation to technological changes to create a successful relationship.
The Binational Chamber of Commerce included Broxel as the first Mexican Fintech to advance financial technologies in a binational manner, the topic is already on the agenda of the Chambers of Commerce of these two countries with important commercial alliances.
Avoiding fraud and the use of illicit money is fundamental for the success of Fintechs in Mexico. The importance of establishing security protocols and regulating them in a legal framework as a prevention policy that favors the growth of the use of financial technologies. Avoiding money laundering or terrorist financing.
Successful user validation
Latin American companies such as ReconoSer ID, have set their eyes on Mexico to offer their user validation services in a biometric way and at higher levels such as documents, INE validation, proof of address, passport, proof of life and other resources that the company has to give certainty to the Fintech of the type of customer they get.
The world of financial technologies is advancing by leaps and bounds, it is necessary for Fintech companies to provide total certainty that their services will not be compromised in any way in terms of security, fraud or misuse of personal data.
A digital fingerprint seems to fall short when it comes to validating our data in any type of financial technology service.
Both users of services such as Fintech companies, ecommerce, banking, credit, etc., require complete certainty of the type of resources available to protect their money.
By increasing user confidence, the sector will grow organically, adapting to new technologies and facilitating operations among users.
By Alfredo Gutiérrez Bayardi
Bibliography
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