Mexico starts 2023 with 650 companies identified in the Fintech ecosystem and positive expectations from entrepreneurs, who hope to exceed the growth in sales of 2021 and 2022, according to data from the Finnovista Fintech Radar Mexico 2023.
Fermín Bueno, co-founder of Finnovista, noted that this number represents a growth of 26%, compared to the previous year, and 18% annualized in the last four years, which gives continuity to the more than five years of growth of the Fintech ecosystem in Mexico.
“If we look at that first radar that we published in May 2016 and compare it to these 650 startups, in 2016 we had barely 130 startups in this ecosystem; We see that there has been a 5X, that is, the Fintech ecosystem in Mexico has multiplied by five”, Fermín Bueno, co-founder of Finnovista.
In 2022, 184 new fintechs were identified in Mexico (28% of the total). The largest segments by number are Lending, Payments and Remittances and Enterprise Technologies for Financial Institutions (ETFI), which account for 60% of the growth.
Only in ETFI there are 40 new startups (65% more than in 2021), this means that “fintech is going from being a vertical to a layer of technology that will enable embedded finance”, highlights the co-founder of Finnovista.
However, it stands out that in the Insurtech segment there were great expectations and three new startups are reported. “This is a jug of cold water because there really is a significant pain to solve, an inclusion issue to solve and a need for digital solutions in the insurance sector. We don’t really know why this is, on the one hand, there is no regulation on the Insurtech issue and on the other, insurers are not very active in the ecosystem, perhaps this represents an opportunity for others to be more active in this sector Good insisted.
Regarding the mortality of fintech startups, the executive points out that there is a rate of 9%. Of the 512 fintech startups that existed in 2021, only 466 remained active in 2022, that is, 46 startups disappeared. “This mortality rate is lower than what we had in 2020 and 2021,” says Bueno.
Fintech optimism for 2023
The study prepared by Finnovista with the support of Mastercard took into account the responses of 200 fintech startups incorporated in Mexico or founded by Mexicans and operating in the country. whose entrepreneurs indicated that they have positive expectations for this year, despite the challenges they face at a national and international level.
This optimism is mainly based on the generation of alliances and strategic collaborations with other companies in the ecosystem, innovation in their sales strategies and the improvement of their product portfolio, the report indicates.
Likewise, the entrepreneurs pointed out that the Mexican population has a faster adoption of their products or services, a better regulatory framework and higher average tickets than other economies in the region.
Fintech revenue increases year on year
On the other hand, the performance indicators, income and the number of Fintech users continue to increase consistently year after year. The companies that are in the upper ranks of income and employees belong mainly to the segments of Digital Banking, Lending and Payments and Remittances, notes the Radar.
Addressing the companies that grant loans, it was identified that the total portfolio range oscillates between 200,000 and 1,000 million Mexican pesos, while the annual weighted average interest rate is 39% per year and the Average Delinquency Index (IMOR) of 11%.
Venture Capital Investment Landscape
Regarding venture capital investments (based on data from LAVCA, the Latin American Association of Venture Capital), it was identified that the strategy during the first half of 2022, both for the Fintech industry in Latin America and for Mexico, was the portfolio diversification, since in all cases the number of deals grew, while the amounts tended to decrease.
In Mexico, an annual drop in the amount of investment of 46% was observed. In this regard, Finnovista points out that this fall represents a normalization of the amount invested in Fintech after a year 2021 with very high growth compared to previous years.
However, Bueno points out, “Fintech continues to be the most important sector of venture capital investment in Latin America, 40% of the investment in dollars goes to Fintech, that is, the most important digitalization and transformation opportunity in the entire region ”.
Download the Fintech Radar Mexico 2023.
Marisol Garcia Fuentes Editorial Director Emprende and Emprendedor.com. I am motivated by stories of tenacity and innovation.