By Laurel Nelson-Rowe
That notion could be about to change.
A new smartphone-based mobile payments system using QR codes is set for wide-scale release from Mexico’s central bank, with partners that include leading U.S. and Latin American e-commerce players. It could reset the country’s nascent mobile banking landscape.
Government and Bank of Mexico (Banxico) officials have increased public announcements about the system—called the Cobro Digital System, or CoDi—in recent months. They’ve described how the mobile payment system is designed to work; referenced early adopters; singled out SMEs as primary targets; and listed its advantages. Yet, reports also cite some of the business challenges CoDi faces:
“The challenge is to turn CoDi into a reality of widely used payments accessible to all Mexicans and a technological platform that promotes greater financial inclusion and development opportunities for the population," explained Banxico governor Alejandro Diaz de. According to one projection, CoDI will provide an estimated 30 million Mexicans with access to loans, insurance, investment, and mobile commerce.6
“In the future, it will no longer be necessary to have a bank in the sense of a traditional, established bank. Mobile phones will become banks,” Arturo Herrara, Mexico’s deputy finance minister, predicted in early 2019.7
While CoDi promises to accelerate mobile payments in Mexico, it faces hurdles including technology, global and local partnerships, and market acceptance. For payment systems to succeed, infrastructure is key. There are quite a few inadequate cellular and Internet coverage areas in Mexico that need attention, experts note. Earlier this year the Mexican government announced plans to increase Internet coverage to more than 90 percent of the nation by 2024; studies say 63 percent of the Mexican population are Internet users, leaving 50 million offline.8
Another technical hurdle could be delivering a simple, consistent, fast, and safe user experience for consumers and vendors. To do so requires back-end identification and authentication processes, and well-integrated systems overall.9 Officials call CoDi a “platform extension” of Mexico’s Interbank Electronic Payment System (SPEI). Nationwide network performance and the SPEI platform’s functionality—working as a seamless, reliable operation—will be essential as CoDi rolls out through banks and businesses.10
In terms of partnerships, Banxico officials have said Argentina’s Mercado Libre and Amazon are involved in the system infrastructure and operations, making this Amazon’s first QR scanning foray in Mexico.11 Banamex, BBVA Bancomer, Banorte, and Santander are among the banks reportedly involved in system pilots this year.12 Mexican micro-lenders also have confirmed pilot participation.13 By the end of September 2019, banks with 3,000 accounts or more will be required to use the system.14
Experts believe that by leveraging the embedded base of smartphones, CoDi can attract small businesses that now deal in high-volume, low-value cash transactions. Buyers or sellers can initiate CoDi, transactions, and sellers can proactively extend product or service offers. Transactions are limited to about $400.15 Mexico’s National Institute of Statistics and Geography (INEGI) research shows that 95 percent of payments of up to 500 pesos ($20 U.S.) are in cash, and are, therefore, primed for a switch to CoDi.16
Observers further suggest that past business and cultural practices will play a role in CoDi’s reception. Banxico director of payment systems Miguel Diaz explained that CoDi will encourage banks to reassess fees that have thus far discouraged small business participation in Mexico’s financial system. Mexican businesses’ longstanding reliance on cash, and a distrust of traditional banking institutions based on past scandals, also could be barriers. These are among the factors the government has acknowledged and is addressing in CoDi awareness, marketing, and educational campaigns.17,18
In statements and promotions, officials often emphasize CoDi’s ease-of use, and how it will make financial services more accessible and affordable to Mexico citizens, half of whom are “unbanked.”19 To participate in CoDi’s commission-free mobile payment system, enterprises or consumers must have a bank account. Purchase information is entered into the payment system via scanned QR codes or brief text message on smartphones. Transactions are authenticated through Banxico’s central system. Following explicit buyer approval, payment is drawn from the buyer account and delivered to the phone via SPEI interconnections. Transactions are said to be instantaneous.
Banxico’s investment, government backing, partner participation, and CoDi’s ubiquitous smartphone solution could trigger the Mexican “payments revolution” that some, such as global financial services researcher RFI Group, expect.20
With CoDi primed for large-scale implementation over the next several months, the stage is set for a robust mobile payments system future in Mexico. SMEs stand to benefit, observers suggest, as the competition for this sector grows, barriers are overcome, and payment options flourish.
Laurel Nelson-Rowe is a longtime writer and editor focusing on business technology, cybersecurity, media, corporate culture, and quality management.
1. “Online Grocery in Mexico: Status Quo and Key Strategies,” Euromonitor International Ltd.; https://www.euromonitor.com/online-grocery-in-mexico-status-quo-and-key-strategies/report
2. “Mexico pushes mobile payments to help unbanked customers ditch cash,” Reuters; https://www.reuters.com/article/us-mexico-fintech-unbanked-idUSKCN1Q80FN
4. “CoDi is an operational reality: the challenge is to make it for everyone, says the Bank of Mexico,” Mexicanist;” https://www.mexicanist.com/l/banxico-codi-mobile-payments-platform/
5. “Leaders in Emerging Markets: Exploring Mexico’s future in finance and technology,” Cornell S.C. Johnson School of Business Emerging Markets Institute; https://business.cornell.edu/hub/2018/11/16/emerging-markets-mexico-finance-technology/
6. “CoDi is an operational reality; the challenge is to make it for everyone, says the Bank of Mexico,” Mexicanist; https://www.mexicanist.com/l/banxico-codi-mobile-payments-platform/
7. “Mexico pushes mobile payments to help unbanked customers ditch cash,” Reuters; https://www.reuters.com/article/us-mexico-fintech-unbanked-idUSKCN1Q80FN
8. “Mexico wants internet access for all. Getting everyone online could reduce poverty, too,” The Conversation; https://theconversation.com/mexico-wants-internet-access-for-all-getting-everyone-online-could-reduce-poverty-too-104206
9. “Building mobile systems infrastructure: 3 key learnings,” Fin; https://fin.plaid.com/articles/how-to-build-mobile-payments-infrastructure-three-key-learnings/
10. “Exclusive: Mexican central bank in talks with Amazon about new mobile payments,” Reuters; https://www.reuters.com/article/us-mexico-cenbank-amazon-com-exclusive/exclusive-mexican-central-bank-in-talks-with-amazon-about-new-mobile-payments-idUSKCN1QM2GG
12. “CoDi is an operational reality; the challenge is to make it for everyone, says the Bank of Mexico,” Mexicanist; https://www.mexicanist.com/l/banxico-codi-mobile-payments-platform/
13. “Mexican non-bank lender Sofipo joins CoDi pilot,” Banamericas; https://www.bnamericas.com/en/news/mexican-non-bank-lender-sofipo-joins-codi-pilot
14. “Mexico to launch smartphone payments system,” Global Government Forum; https://www.globalgovernmentforum.com/mexico-to-launch-smartphone-payments-system/
15. “Cashless money transactions – Mexico’s new payment method,” Globe Business Media Group; https://www.internationallawoffice.com/Newsletters/Banking/Mexico/Hogan-Lovells-BSTL-SC/Cashless-money-transactions-Mexicos-new-payment-method#
16. “Mexico to launch smartphone payments system,” Global Government Forum; https://www.globalgovernmentforum.com/mexico-to-launch-smartphone-payments-system/
17. “Mexico pushes mobile payments to help unbanked customers ditch cash,” Reuters; https://www.reuters.com/article/us-mexico-fintech-unbanked-idUSKCN1Q80FN
18. CoDi: An Evolution of Mexico’s Main Payment System,” Central Bank Payment News; https://cbpaymentsnews.com/assets/CBPN_Volume1/CBPN-December-2018-Vol1_4_Web.pdf
19. “Mexico pushes mobile payments to help unbanked customers ditch cash,” Reuters; https://www.reuters.com/article/us-mexico-fintech-unbanked/mexico-pushes-mobile-payments-to-help-unbanked-consumers-ditch-cash-idUSKCN1Q80FN
20. “Latam: Mexico’s retailers jump onto mobile payments,” RFI Group; shttps://www.rfigroup.com/rfi-group/news/latam-mexico’s-retailers-jump-mobile-payment