In the United States, access to financial services is seen as an essential part of a pathway to reduce economic inequality. This awareness is prompting a growing number of fintechs to offer free or low-cost products and services. Additionally, US credit bureaus are increasingly incorporating alternative data into their models. Meanwhile, thanks to a nascent wave of “buy now, pay later” (BNPL), recent research suggests US consumers will make nearly $100 billion in retail purchases using BNPL tools this year, up from $24 billion last year.
We may take improved access to the financial services pie for granted in the United States, but Mexican consumers struggle with a lack of access in a context where 86% of all payments are made in cash; 37% of adults have bank accounts, and 30% of the income of Mexican banks comes on average from commissions.
In addition, Mexico has a high proportion of workers who are part of the informal economy, up 57%, according to a study by INEGI, Mexico’s National Institute of Statistics and Geography. This means consumers are struggling to build a credit history that would qualify them for loans and other essential financial services.
And while some countries have seen growth in access to financial services, Mexico has continued to lag behind other countries in the region. For example, the number of Colombians with bank accounts increased by 3 million during the pandemic, to 31.2 million, according to government sources. Recount The Wall Street Journal. Mexico, on the other hand, has moved in the opposite direction. Additionally, at 34%, Mexico’s credit-to-GDP ratio also shifts behind other Latin American economies, including Colombia and Brazil.
Breaking the cycle of poverty
Removing barriers to financial services products is key to improving economic outcomes, sustainably managing the costs of daily living, and enabling consumers to plan for the future. Access means consumers can “take advantage of business opportunities, invest in education, save for retirement and insure themselves against risk”, according to to research of the World Bank. In particular, access to credit is a key that can bring greater predictability to the management of consumers’ financial needs and ensure them a healthy financial life.
Making credit accessible to a large portion of the Mexican population requires out-of-the-box approaches that go beyond traditional credit checks to meet a variety of financial needs throughout a consumer’s lifetime. These approaches can include using alternative data to assess a user’s creditworthiness and ability to repay a loan, providing access to BNPL solutions that help increase consumer purchasing power while maintaining affordable repayment terms, and providing employees with quick, interest-free access to a portion of their salary before payday.
The path to financial inclusion involves leveraging fintech innovation to develop products that reach low-credit, sometimes insufferable consumers who would otherwise be excluded from financial services. Fintechs like Kueski, for example, – and indeed other major technology-enabled global lenders and payment providers – are proof that these challenges can be mitigated by technology that has a direct line of sight to behavior, profile and ability of a client to repay a loan.
Currently, there is an unprecedented opportunity to reach millions of underserved and underbanked consumers who are willing and able to repay, and it is up to the industry to figure out how to meet this challenge using technology as a force. for the good.
About the Author: Adal Flores is the co-founder and CEO of Kueski.