President Claudia Sheinbaum acknowledged that Mexico is lagging behind in adopting digital currency, a situation that reduces the agility of an economy where seven in 10 transactions are still done in cash, which limits the traceability of money and slows the growth of formal commerce. In her crusade against cash, the President has focused on high bank profits, which her government considers one of the main obstacles to the take-off of electronic payments.
The Bank of Mexico and the financial system regulator, the National Banking and Security Commission (CNBV), have submitted for public consultation a proposal to substantially reduce interchange fees applied to card payments. These are the fees that the merchant’s (acquiring) bank pays to the customer’s (issuer) bank every time an electronic transaction is made. In practice, they are usually passed on to consumers: either because they are integrated into prices, or because they are added to other fees.
Last year, Brazilian investment bank Bradesco BBI estimated that foreign exchange commission income accounted for about 52 billion pesos for banks, or 13% of their pre-tax profits. In 2024, card payment volume amounted to 5.8 trillion pesos, with a weighted average rate of 1.33% for credit and 0.60% for debit. If the proposal materializes as proposed, rates would be reduced to 0.3% on debt and 0.6% on credit, which would halve foreign exchange income.
“Our goal is to continue to advance digitalization in Mexico. There are countries like Brazil or India where there are many advantages in not using cash. The problem we have today is that there are a lot of fees in digital payments,” the president said in his morning session on September 25, scolding banks for not promoting CoDi, the central bank’s free QR payment tool.
In addition to the proposed legislation, the country explores the experience of its peers in developing public payment systems. This combined strategy constitutes the largest effort made so far on this front, in a country with a growing rate of use of financial services and where a sector traditionally concentrated in a few operators maintains high levels of commissions and profits. The 2024 Financial Inclusion Survey (ENIF) reported, for the first time since it was conducted, an increase in product ownership (such as savings or credit accounts) by 77% of the adult population, compared to 68% in the 2021 and 2018 surveys.
“Sheinbaum may be a pragmatic decision maker, but she is undoubtedly a progressive leader, so these measures on financial intermediaries – whether through insurer contributions in the balance sheet or through exchange rates – are not surprising. Given her style, we expect the industry to negotiate behind closed doors and reach consensus,” added the Brazilian bank operating in the country.
A system like Pix?
Pix, created by the Central Bank of Brazil in 2020, It changed the transactional landscape of Latin America’s largest economy, opening a channel between buyers and sellers to make transactions without costs by reducing intermediaries such as institutions or the Visa and Mastercard networks. This was even placed at the top of US President Donald Trump’s list of trade complaints against his counterpart Luiz Inácio Lula da Silva.
The system is used by 76% of Brazilians and has become a model of financial inclusion for many economies in the region, such as Colombia, which last month released its own version: Bre-B. But for the Office of the United States Trade Representative (USTR), it represented an obstacle for its companies in the sector, such as Visa, PayPal or Apple Pay. Now Mexico is studying to replicate the operation, so it will have to strengthen its position towards the banks, without neglecting the reaction of the Trump administration.
Ramiro Nández, director of Users of the Mercado Pago México, states that the fintech Mercado Libre – which has applied for a license to become a bank – is in contact with the Agency for Digital Transformation and Telecommunications, one of those in charge of carrying out the mandate to rationalize virtual money. He adds that they have proposed a system similar to that of Argentina or Brazil, where identity documents or telephone numbers are used as “keys” to connect to a public platform where payments are made without paying commissions for small businesses, corporations or individuals.
“From the user side, there is a huge advantage when it comes to paying, because they can do it from the simplicity of the mobile phone and it is accessible to everyone. Pix continues to evolve and this has been forced by the large adoption it has had. And what you see today in countries like Brazil is that you are on the beach or on the street and street vendors can make you pay by digital means, when before, if you didn’t have cash you couldn’t make a sale. We believe there is something very powerful there,” says the director.
“And, of course, this also has implications for the government and regulators, as they have much more transparency about the money that is being moved. Digitized money helps the government to have traceability of where the money comes from and avoid illicit activity,” he adds.
Barriers to competition
Such a platform also means eating into a portion of the payment processing market. Currently, a handful of large issuing banks, such as BBVA, Banorte, Santander or Banamex, are the shareholders of the two main clearing houses that process card transactions, and therefore determine the network’s rules of the game, such as their fees and access requirements, something which Cofece, the country’s defunct competition body, opposed.
The United States has also flagged it as one of more than 50 non-tariff barriers that must be removed before the revision of the free trade agreement, USMCA, because it affects the “level playing field for American providers of electronic payment services,” according to the USTR.
Oriol Ros i Mas, partner of the venture capital fund Kalonia Venture Partners, focused on this startups financial, highlights the growing relationship between politics and payments, as a tool to rationalize economies and create satisfying experiences for consumers. “Mexico has excess liquidity and, obviously, this is something that should be among the main planks of any short, medium and long-term policy approach. It is not possible for a society to be like that heavy in cashbecause people lose access to financial tools that are proven to bring progress.”
Pix has become a source of pride for Brazilians and now also offers them the possibility of financing their sales in installments. “In Mexico we talk a lot about the banking activity of ordinary citizens, but the real problem is in the economic middle class, in small and medium-sized businesses. This is the driving force of a country”, also adds the co-founder of the Latinia banking company. software of bank notifications.
