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Venture Capital puts an eye on the fintech sector

Mexico is considered among the first options.

The fintech world in Mexico is experiencing a stage of growth, just five years ago and there was talk of technological entrepreneurship, and bringing the financial system closer to the unbanked population.

Now, this vertical of entrepreneurship is the one that most excites corporations, investors and the financial sector. In the country there are 515, according to the National Banking and Securities Commission, of which 394 are Mexican startups, which generate an annual volume of operations of 68,409 million pesos.

A growing sector because in Latin America 50% of the population does not have access to traditional financial services and “thanks to technology and entrepreneurship, we are seeing business models that can bring financial services closer to these segments of the population that are underserved or underserved” , commented in a talk with El Economista Andres Fontao, co-founder and partner of Finnovista in the offices of the accelerator.

Main challenges

Fontao highlighted four challenges facing fintech startups in Mexico. The first is to fight against the “incumbents”, that is, the traditional banks, which saw these companies as a competitor, but that little by little have changed their perception and now see them as an ally, as a driver of technological developments.

The second challenge is access to Venture Capital, which can finance the development and growth of these companies. The third is access to qualified talent, which can take these ideas to product and those products to successful businesses.

A fourth challenge is regulation: “the regulatory framework may or may not like different actors but (…) it is positive, it brings certainty and that certainty encourages investment. Investors do not like to invest in gray spaces, in white or black spaces”.

Investment

The maturity of Venture Capital in Mexico has not yet reached the level of Silicon Valley, New York and London, says Fontao; nevertheless, there is great interest in the fintech sector, “it was not like that five years ago, because there was a lot of uncertainty and ignorance, but today everyone wants to be part of this fintech movement, because they begin to understand the dynamics and opportunity that exists within this vertical”.

Talking about a fintech world in Mexico, from other latitudes, was remote, but investments like the one that Goldman Sachs Bank USA recently made in Credijusto, a Mexican company dedicated to grant loans to SMEs, or the investment of 5,000 million dollars that SoftBank allocated to Fintech market, of which already invested 20 million dollars in Clip, startup that creates mobile terminals for any business to accept payments with credit or debit cards, have attracted the attention of international investors.

“Today you walk through New York and breathe another air of interest from the investment community towards what is happening in the fintech world in Mexico, a fear that I am getting lost”.

In addition, private equity funds are considering Mexico, but not for seed capital but for first, second or third rounds of investment.

Fintech Law

Regarding the Fintech Law in the country, Fontao said that adopting a regulatory framework also brings a learning period and startups will have to adapt.

“The fact that fintech disappears is not bad, because it can also be a period of consolidation by fintech larger”, and cause more entrepreneurs to be encouraged to create startups or companies from another country.

However, according to the report “Fintech thermometer: the challenges of regulation”, carried out by Finnovista, Endeavor, Santander Bank and the United Kingdom Embassy, startups said there will be strong barriers to entry for new players, high costs associated with compliance with the law will generate inefficiencies.

In addition, 63% of startups believe that they must invest less than $ 55,000 and 37% more of this amount to meet regulatory expenses. “If secondary laws were applied as they were disseminated through the circulars, only 42 companies could meet the expenses of the regulation, allocating money from their investments, and only 39 would do so with the money from their income”.

Published inFintech

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