How Mexico’s Ecosystem Provides The Tailwinds For AP Automation

Progress in the payments arena relies on visionary innovators to challenge the old ways of thinking and drive the market forward. Often, however, those with a grand vision must be patient and wait for the ecosystem to evolve enough to support those innovative concepts.

Luckily, the payments arena continues to strengthen the infrastructure upon which FinTechs build their solutions. Whether it be real-time payment capabilities or open banking, the current climate continues to open up avenues for new products, healthy competition and better user experiences.

B2B payments have increasingly benefitted from this forward momentum, according to Rodolfo Corcuera Meier, CEO of Mexico-based FinTech Higo. Speaking with PYMNTS, Corcuera discussed the tailwinds that have helped drive small business accounts payable workflows into the digital age and that have created the possibility for FinTechs to tackle the legacy B2B payment pain points that plagued firms for years.

Unique Challenges

The biggest friction points that Higo hopes to address for Mexican small- to medium-sized businesses (SMBs) are challenges that are universally felt.

Like in so many other markets, SMBs in the country have historically relied on manual data entry and spreadsheets to manage accounts payable, even amid ongoing digitization. Business owners typically receive an invoice via email or WhatsApp, but because that digital information is stuck within a silo, professionals still have to re-key that data into a ledger.

Each subsequent workflow follows a similarly manual data-entry strategy: information about who the invoice is from, what the bill is for, amounts, payment approval, initiation and receipt is all entered into that spreadsheet by hand. Making this process even more challenging is the fact that these ledgers and payment calendars are not static. Rather, noted Corcuera, businesses must continually alter these spreadsheets and update them to reflect any changes or actions taken.

Based on this information, a small business will regularly export this spreadsheet and submit payment directions to the bank to initiate a wire or bank transfer transaction.

“For an average company with 15 to 20 suppliers, this takes about three to four hours a week,” he explained. “It’s not only time-consuming but [also] prone to human error.”

Convergence Of Tailwinds

The automation made possible by FinTech can address many of the biggest areas of friction resulting from this legacy accounts payable strategy. Yet, it’s only until recently that a convergence of market tailwinds descended upon Mexico to the drive adoption of a tool like Higo.

Like many other jurisdictions, the country is currently experiencing an acceleration of enterprise digitization that began before the pandemic but was undoubtedly intensified because of the crisis and work-from-home requirements.

But there was another factor unique to the Mexican market that made a solution like Higo’s particularly well-positioned to make an impact on the small business B2B payments space.

“Mexico is one of the most advanced countries in the world in terms of eInvoicing mandated by law,” explained Corcuera, pointing to legislation that came into effect in 2011, later expanded in 2014, requiring businesses to use electronic invoices with real-time reporting to the country’s tax authority, Servicio de Administración Tributaria (SAT).

For Higo, this means the ability to integrate directly into the SAT’s database, allowing for data on those invoices submitted and received to businesses to be able to automatically be aggregated within the platform. Not only does this mean the end to manual data entry, but there are broader ramifications for such automation and transparency in the accounts payable environment, including an inherent strategy to combat B2B payments fraud.

According to Corcuera, FinTech solutions like Higo are better suited to managing this information and facilitating B2B payment, compared to the legacy portals of traditional banks, which may be able to complete a transaction but are unable to keep richer information about those payments and the invoices to which they are connected.

In an ecosystem in which eInvoices are mandatory, small businesses are eager to embrace the cloud. Enterprise digitization is imperative — the journey towards accounts payable automation today faces far fewer roadblocks than before.