Mexico’s new government, led by President Andres Manuel Lopez Obrador, is setting its sights on financial technology to get the country out of poverty.
According to a report from Reuters, the Mexican government recently announced plans to make financial services more affordable in a country where more than half of the population does not have a banking account, otherwise known as the unbanked. The government is gearing up to roll out a digital payments system that will be operated by the central bank, enabling citizens of Mexico to make and receive payments via a smartphone without any fees. The payment system, called CoDi, is slated to launch in March.
To use the mobile app, consumers must have an account with an institution that is participating in Mexico’s existing interbank payments systems, which will power the payments platform. Jaime Cortina, director of operations and payments at the central bank in Mexico, told Reuters that the aim is to create a payment method that citizens can use to send money to one another and to make payments at stores and online.
“In the future, it will no longer be necessary to have a bank in the sense of a traditional, established bank,” said Arturo Herrera, Mexico’s deputy finance minister. “Mobile phones will become banks.”
The report noted that banking systems embedded on mobile phones are popular in emerging markets, including in China, India and Kenya, driven in part by private-sector FinTechs. It’s not clear whether a state system in Mexico will be easy to use. Reuters noted that initially, the system will require help from the same banks that kept the financial services market out of reach for low-income Mexicans for decades due to the associated fees. Less than reliable telecom service in the country could also hurt the efforts.
“Mexico has a lot of the key ingredients to succeed, but it’s not plug and play,” said Monica Brand Engel, a partner at Quona Capital, in an interview with the newswire.