Mexico FinTech News
Plata – The Elon Musk of Mexican FinTech?
Plata, the credit card FinTech run by former top Tinkoff executives—once a leading Russian FinTech—has obtained its license to incorporate as a bank in Mexico. While some have expressed surprise that Plata got its license before Nu and others, Plata submitted its request at least 7-8 months before Nu. In fact, from beginning to end, the license process took 677 days, slightly longer than Revolut’s process of 657 days and materially slower than Openbank’s 476 days and Bineo’s 467 days (the latter two are parts of holdings of incumbent banks, facilitating the process).
It will probably take another year before Plata is ready to launch its bank in Mexico, when it will be able to offer deposit accounts and grow its personal loan and investment portfolio services.
Still, the license approval is a triumph for Plata (and its main advisors, Tenet Consultores). Unlike Revolut, Nu, or Mercado Pago, Plata does not have the backing of a big global parent and had to deal with misunderstandings about its Russian roots. Plata was founded by Baring Ventures, one of Tinkoff’s original private equity backers and also investors in Kaspi, Revolut, and other top FinTechs. Baring Ventures was drawn by Mexico’s low credit penetration, the high profitability of incumbent banks, and the belief that the know-how and people from its investments in Tinkoff and Kaspi could be successfully applied here. (Oleg Tinkov, the Tinkoff founder who has no direct role in Plata, left Russia for good in 2022 following his outspoken criticisms of the invasion of Ukraine, renounced his Russian citizenship, and was forced to sell his stake in Tinkoff to Putin-friendly oligarchs).
Meanwhile, Plata’s credit card business appears to be doing well, and new functionalities (investing in US stocks and personal loans) have been added to the app. The company likely has around one million cards issued and raised at least US $250 million in debt this year, most recently raising an unsecured facility of US $55 million—mostly from hedge funds—with Scotia as placement agent. Industry sources suggest its NPLs and cost of risk are lower than other credit card FinTechs, even when adjusting for the fast growth of its portfolio.
App downloads and web traffic consistently place Plata in the top five new digital financial platforms, behind Nu and Mercado Pago and despite having fewer products in line with or ahead of Ualá, Klar, Stori, and others. Based on industry sources, Plata has a much lower first-fraud rate than its competitors (Nu, Stori, Klar), in part because you cannot get a Plata credit card without a visit from one of its ambassadors—although this likely comes with higher operational costs. If you are going to commit fraud, it’s a lot easier to do so with the others that never visit you.
So how has the relatively unknown Plata seemingly matched or in some cases outfoxed better financed fintechs like Nu, Ualá, Stori, Klar, and others (so far)?
- Tinkoff expertise in Russia. Tinkoff was the earliest and most successful FinTech in the world. Indeed, David Vélez from Nu has said in public that he took inspiration from Tinkoff. The ambassador approach, different from other FinTechs, is straight from Tinkoff.
- Engineering and data science as opposed to banking approach. Plata has about 1,500 employees. Of the 500 in corporate, 350 are based outside Mexico (mostly engineers and data scientists, many with previous Tinkoff experience), and another 150 are based in Mexico, comprising different nationalities, but at least half are Mexican with diverse backgrounds in engineering, finance, and compliance. The company has another 1,000 local employees in operations in Mexico (ambassadors, etc.).
- Focus on Mexico alone. There are no competing management and tech demands, as may be the case with Nu, Mercado Pago, Ualá, or Revolut.
- Hardcore, Elon Musk culture. Unlike some traditional banks or FinTechs (but not dissimilar to Mercado Pago), it’s a full-on, work-from-office, 24×7 customer-centric culture. There are no empty fancy offices at Plata.
Why bother to be a bank when FinTech Sofipos and banks are paying above CETES for deposits? Plata’s bet seems to be that wholesale funding costs will come down from the low 20s% to near TIIE when it has the seal of approval from being a regulated bank, its deposit product kicks in, and profitability becomes more apparent. In other words, while it’s costly to be a bank, it’s more costly not to be.
El Economista, 12/10/24, Fernando Gutiérrez: Plata Card Receives Authorization to Become a Full-Service Bank in Mexico
Mexican Fintech Klar Applies for Banking License
Klar, a Mexican fintech ranking third in deposits collection among Sofipos, has begun the process to obtain a banking license in Mexico. This move aims to diversify its product offerings, enhance deposit security, and expand services to small and medium-sized enterprises, including payroll management and credit options. As Plata’s case illustrates, obtaining a banking license in Mexico is a lengthy regulatory process, requiring significant investments to comply with strict requirements on capitalization, risk management, and customer protection. Klar joins Nu, Masari Casa de Bolsa, Mercado Pago, Konfío in seeking a bank license.
Bloomberg Línea, 12/10/24, Italia López: Mexican Fintech Klar Applies for Banking License Other sources: El Financiero, Latam Fintech Hub
DiDi, Uber, and Rappi Seek Clarity in Labor Reform for Platform Workers
DiDi, Uber, and Rappi have called on the Mexican Congress to ensure legal clarity in the proposed labor reform aimed at regulating employment conditions for platform workers. The reform, championed by President Claudia Sheinbaum, seeks to grant labor rights such as social security and holiday bonuses to gig workers. However, the platforms highlight the importance of addressing critical aspects like tax structures and guidelines from the Mexican Social Security Institute (IMSS) to avoid economic or legal complications for both workers and companies.
Reforma, 12/10/24, Verónica Gascón: DiDi, Uber, and Rappi Seek Clarity in Labor Reform for Platform Workers
HSBC reviews retail banking outside UK and Hong Kong; could ‘significantly cut’ Mexico
HSBC is reviewing its retail banking operations outside the UK and Hong Kong, a move that could see it substantially scale back operations in countries including Mexico, a country where it “doesn’t have a competitive scale”; no decision has been made yet. While HSBC is part of the so-called G-7 in Mexico, it has 7% of total system loans, compared to 25% of market leader BBVA and Banorte’s 15%. Jorge Arce, Mexico CEO, recently saw his remit expanded, now also overseeing HSBC’s operations in Brazil, Chile (countries where the bank has no retail operations) and Uruguay. In an effort at damage control, Jeanette Leyva, a columnist close to HSBC management in Mexico, denied the bank would leave Mexico “there is rather a renewed strategy for everyone, including Mexico, but not an exit, as has been misinterpreted”.
FT, 12/12/24, Ortenca Aliaj and Kaye Wiggins: HSBC reviews retail banking outside UK and Hong Kong. Other sources: El Financiero, HSBC press release.
Bitso Reaches 9 Million Users and Expands Remittance Volume
Crypto exchange Bitso has surpassed the nine million user mark; 70% are based in Mexico. The platform reported an 80.6% increase in transactional activity for individual users over the past year. Bitso also aims to handle 10% of the annual remittance volume from the U.S. to Mexico by the end of 2024, a market that totaled US$63.3 bn in 2023, according to the central bank. Measured by profitability, Bitso is by a long way Mexico’s most successful FinTech.
El Economista, 12/10/24, Sebastián Estrada: Bitso Reaches 9 Million Users and Expands Remittance
Prima Secures US$23 mn Series A to Enhance Manufacturing and Supply Chain Integration
Prima, a Mexico City-based manufacturing and supply chain integrator, raised $23 mn in a Series A funding round, bringing its total funding to US$42.5 mn. Investors included Acrew, Nazca, and Quona Capital. Founded in 2019, Prima provides Mexican manufacturers with financial support, engineering, and end-to-end solutions. The funds will support U.S. expansion, product development, and elevating Mexico’s manufacturing standards to compete globally.
LatamList, 12/10/2, Sara Delgado: Prima Secures $23 mn Series A to Enhance Manufacturing and Supply Chain Integration
Mercado Pago Airlines Launches in Mexico with Installment Payment Options
Mercado Pago, the financial services platform of Mercado Libre, has partnered with airlines Viva and Iberia to facilitate the purchase of airline tickets in Mexico. The partnerships enable users to buy tickets digitally using options such as account balance or credit cards. Additionally, Mercado Pago offers installment payment plans, making air travel more accessible to a broader audience.
Milenio, 12/11/24, Axel Martínez: Mercado Pago Airlines Launches in Mexico with Installment Payment Options
Other News
BBVA press release, 12/09/24: BBVA Launches Used Car Marketplace
Mexico Business News, 12/13/24, Mariana Allende: What Is Driving Mexican Fintechs to Seek Banking Licenses?
Yahoo Finance, 12/11/24, Staff: Kueski Welcomes Andreas Waldmann as Chief Marketing Officer
Mexico Industry, 12/10/24, Staff: Mexico Joins the Technology Innovation Index
Press release, 12/11/24: Mexican Digital Health Startup Sofía Announces $13.5M Financing
LatAm FinTech News
MercadoLibre and Nubank Compete for Leadership in Latin America’s Fintech Market
Latin American e-commerce giant MercadoLibre Inc. is increasingly battling for the same turf as the region’s other big success story, digital bank Nu Holdings Ltd. The companies’ leaders are friendly rivals who emerged from the startup scene together, and both downplay the idea that they’re gunning for each other. But MercadoLibre has amassed tens of millions of users for shopping and transactions whose data it can mine to offer products from insurance to personal loans. That’s bringing it into the same orbit as Nubank.
Bloomberg, 12/10/24, Daniel Cancel, Cristiane Lucchesi, and Leda Alvim: MercadoLibre Races Into Fintech Turf War With Rival Nubank
Global FinTech News
eToro Plans US$3.5 bn U.S. IPO for Q2 2025
eToro, the trading and investment platform, is preparing for a U.S. initial public offering (IPO) in the second quarter of 2025, targeting a valuation exceeding US$3.5 bn. Goldman Sachs has been appointed to lead the IPO. This follows a failed attempt in 2021 to go public via a US$10.4 bn SPAC merger, which was abandoned in 2022 due to declining tech valuations and regulatory changes. In 2024, eToro paid a US$1.5 mn fine to the SEC for operating as an unregistered broker. The IPO reflects eToro’s growth amid increasing global expansion and a surging crypto market.
Finance Magnates, 12/10/24, Staff: eToro Plans US$3.5 bn U.S. IPO for Q2 2025
David Sacks Appointed as Trump Administration’s AI and Crypto Czar
President-elect Donald Trump has appointed venture capitalist David Sacks as the White House AI and Crypto Czar, a newly created role to shape policies on artificial intelligence and cryptocurrency. Sacks, co-founder of Craft Ventures and former PayPal executive, is known for his significant investments in technology and connections with leaders like Elon Musk. His appointment signals a potential shift toward industry-friendly regulations in these sectors. However, concerns have been raised about conflicts of interest due to his ongoing venture capital activities and investments in AI and crypto.
PitchBook, 12/10/24, Staff: David Sacks Appointed as Trump Administration’s AI and Crypto Czar
Other News
Bloomberg, 12/10/24, Pamela Barbaglia: Klarna Adds a Dozen Banks to US IPO Roster as Listing Nears.
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