The Mexican Fintech ecosystem is unstoppable, with a yearly average growth of 23% since 2016, based on previous Finnovista Fintech Radars, this increase is in part due to venture capital investments in the sector as well as the Insurtech segment’s rapid take-off
Since 2016, the number of total startups in the Mexican Fintech sector has grown at a yearly average rate of 23%. This statistic is based on a thorough analysis of data collected from the Report on Fintech in Latin America 2020 (Third Edition), in collaboration with the Inter-American Development Bank (IDB), and will be published this year. The sector’s growth illustrates how new enterprises are fulfilling a social demand by applying new technology to improve financial and investment activity. In fact, 441 startups have been identified within this sector by the Fintech Radar, representing a 14% increase compared to the previous edition released in May 2019, with 394 Fintech startups identified in Mexico.
One of the key takeaways from this report is the tremendous growth that Insurtech, the segment of companies dedicated to enhancing and automating the insurance industry through technology, is currently undergoing. With a total of 38 identified startups, this indicates a 46% growth rate compared to earlier editions of the report. Another key datapoint is that 60% of Mexican Fintech startups have received some form of financing over the past months, a third of those self identifying as receiving venture capital funds.
Based on the analysis undertaken throughout this report, it became clear that Fintech has unquestionably established itself as a key sector within Mexico. Main data that has led to this conclusion includes a decrease in the mortality rate which currently stands at 4.5%, translating to 18 startups ending operations over this past year. That’s a positive statistic when compared to the 11.3% startup mortality rate in 2018.
Another interesting data point was that the Insurtech segment grew 46% since the last Fintech Radar published in May 2019. This significant increase stands out especially when compared to other Fintech segments, and allows us a glimpse into 2020, where this could be the boom year for Insurtech startups in Mexico.
It’s especially noteworthy that, since 2016, the number of Fintechs has grown at an average annual rate of 23%. A main implication of this is the continuous rise in demand for improvement within the financial services sector in Mexico and that entrepreneurs are taking this opportunity to convert themselves into key players within the field.
As earlier mentioned, while considering the overall growth, it’s important to keep in mind that this is a dynamic process of new Fintechs launching their business as well as other startups ceasing theirs. Since the last Fintech Radar Mexico, only 4.5% of the sector became inactive, the equivalent of 18 companies.
To put this indicator in perspective, we’d like to remind you that the mortality rate reported in 2019 with respect to the number of Fintechs identified in 2018, was over twice that at 11.3%. That means that 2020 has had the lowest mortality rate for Mexican Fintechs since we started this research.
In regard to market segmentation, Payments and Lending continue to lead the service offering among the Fintech segments in Mexico, consolidating themselves as the main verticals with the largest number of initiatives competing to gain market share.
Another fact worth emphasizing is related to the Digital Bank segment. Digital Banking has gone from not even being mentioned in the 2017 edition of the Fintech Radar Mexico, to having 19 neobank or digital banking solutions in 2020, drawing a lot of interest within the ecosystem and growing at an average annual rate of 24%.
Also, the Enterprise Technologies for Financial Institutions (ETFI) and Insurance segments have set themselves apart in 2020 with a significant increase in new businesses.
Concretely, over the last year, each segment grew by 15 and 13 new startups, respectively. The ETFI segment grew by 39% with regards to the previous year, which indicates that Mexican financial institutions are demanding more software solutions development every year. A Fintech categorized as ETFI is typically a company that develops software and specializes in providing white-label technological solutions for financial institutions.
Moreover, with an increase of 46% since the most recent edition of the Fintech Radar, the Insurance segment has demonstrated exceptional growth with respect to other segments. Perhaps this indicates that 2020 will be a defining year for Insurtech startups in Mexico. This hypothesis can be supported by the recent creation of the Insurtech Association of Mexico.
In the last Mexican Fintech Radar, we found that 70% of the sector’s ventures have their main operations in Mexico City, consolidating the capital as the most dynamic Fintech hub in the country and one of the most relevant innovation centers in Latin America.
Another important fact found in the Mexican Fintech Radar 2020 published by Finnovista was that Fintech companies are employing an average of 35 people, excluding the most successful startups in the industry that reported employing over 1000 professionals. In total, according to Finnovista, it is estimated that Fintech generates about 60,000 jobs in Mexico.
It would be particularly interesting to monitor the evolution of this indicator over the next few years, not only for the importance that the sector has in the overall employment rate of Mexico, but also to see how Fintech is attracting top local, regional and international talent to Mexico.
One of the key factors to the growth of the Mexican Fintech ecosystem is the rise of venture capital investment activity, as we see cases of startups that have recently attracted significant amounts of financial injection that is already allowing them to attract more and better talent (Check out the white paper “Latin America: Global Investors’ New Fintech Frontier”).
Importantly, it should be highlighted that over 60% of the Fintech companies in Mexico surveyed for this Fintech Radar 2020, reported to have received some kind of funding. The main source reported by more than a third of these startups was venture capital. This clearly demonstrates the confidence that investors have in the fintech sector because it is a viable solution to close the supply-demand gap for financial services in Mexico.
Finnovista based the Mexico Fintech Radar analysis on data collected for the Report on Fintech in Latin America 2020 (Third Edition), to be published this year in collaboration with the Inter-American Development Bank, which included more than one third of Fintech startups identified in Mexico (168).
Finnovista would like to thank the Inter-American Development Bank for collaborating in the data collection process which could be used to update the Fintech Radar Mexico 2020.
Do you know of any Fintech startups in Mexico that have not been included in our Finnovista Fintech Radar? Please contact: [email protected].