Fintech, changes in the dashboard of the financial system

Fintech is not only the Financial Technology Institutions (ITFs), but also the other companies that provide some financial service or contribute to it through technological tools; And then, what happens with the other Financial Entities in operation, can they also be Fintech? Will the Popular Financial Institutions (SOFIPOs) be facing a strategic situation that could project them?

Going back to the first question; I think the answer is Yes, of course certain Financial Entities from other sectors and already in operation could adapt their business models to materially become a Fintech, but in relation to the second question, the topic of SOFIPOs becomes more interesting .

This is a segment that was born a little over 10 years ago and that can be accounted for within the efforts that the Mexican financial authorities have historically implemented with the intention of increasing financial inclusion primarily in the population sectors with less access to the financial system, since be it for geographical, cultural and even infrastructure reasons.

In the name they bring the justification for their creation, however, precisely for the reasons stated above regarding geographical, cultural and public infrastructure problems, often opposing the financial health and profitability of those entities that are naturally mercantile, it is that in Most of the cases show moderate growth as a sector, and certainly less than its potential could imply.

Some data published by AMSOFIPO itself indicates that this sector is currently made up of 39 Entities in operation, with almost 5 million clients, more than one thousand one hundred branches, assets for more than $35,700 million pesos and traditional deposits for just over $24,700. millions of pesos; all this with schemes that allow them to reach more than 1,629 municipalities of the 2,471 that exist in the country.

Since these entities were born, they posed an interesting dilemma for investors: what is better, to seek authorization as a BANK or SOFIPO. Basically they can do the same, and some of the activities that SOFIPOs cannot carry out are not necessarily very attractive at present because they are services with decreasing demand; for example, operating deposit accounts with a checkbook, or dealing with more complex operations that are not part of the figures used in what is known as consumer banking.

In this short history, whether due to mergers or reversals, the number of entities in operation has been reduced despite the fact that their indicators as a sector have shown certain increases. On the other hand, these finance companies can carry out, among other activities, the reception of resources from the public, the granting of credit, factoring and financial leasing, operating debit and credit cards, receiving payments for services, payroll direct debits, foreign currency trading, and transfers; very attractive menu for the Fintech ecosystem.

Perhaps the clearest case is that of the purchase of SOFIPO Akala, by the Nu group, which now gives rise to NU Mexico, the flagship of said financial group in our country, in addition to other movements equally aimed at achieving control of this type of financial entities as strategic arms to advance in the Mexican Fintech board.

The options for Fintech investors who want to explore this alternative are simple, choose to request an authorization for a new SOFIPO, or buy an existing one in operation or pending start-up. As we already said, the number is around 40 Entities (in operation and pending start), some of them with figures that exceed many banks, and that for the same reason, have their own model already developed, but others that have not really achieved reach breakeven points, with business models that are not very well defined, and these clearly present scenarios of underuse of the licenses granted; their lack of viability may sooner or later expose them to the risk of revocation, an attractive situation for a strategic acquisition.

In short, the first important moment in the history of the SOFIPOs is when they were born, but there is no doubt that we are facing another momentous moment for this sector and that in many cases it may not only mean their subsistence, but also the entry into the Fintech universe with potential growth difficult to see in the sectors of traditional Financial Entities.

Twitter: @LBartolini

e-mail: lbartolini01@gmail.com