The FinTech Industry in Mexico

The following report analyses the Fintech Industry in Mexico through the five forces of Porter Model, portraying how this Industry has been growing in recent years, and what challenges you would found if you decide to set up a Fintech in this country.

Rivalry between competitors:
In 2017, Mexico accounted for 238 FinTech startups, positioning itself as the biggest FinTech industry in Latin America. The attractiveness of the market and the innovative financial solutions as a response to the arising digitalization gave a boost to the FinTech ecosystem, creating the impressive number of 80 startups in only 10 months.

As with every emerging and innovative industry, the booming popularity of the FinTech startups in Mexico inevitably accounted for a certain degree of competition, concentrated in 11 different segments, such as Insurance and Corporate Finance Management (Figure 1, Annex). On average, FinTech startups encounter 20 competitors by segment, but some are even less competitive, with only 5-6 companies fighting for a share of the market.

But despite the emerging competition between the FinTech startups in Mexico, the analysis revealed that there is still a relatively big share of the market to be conquered. The lack of fixed costs for digital solutions due to their innovative nature, the high level of possibilities for differentiation, and the high entrance barriers associated with huge investment costs are only some of the factors that make the sector far from fully explored. Moreover, the presence of diverse segments, none of which takes more than 23% of the market, leaves room for innovation and further exploration of the sector.

Statistic on the Fintech radar in Mexico

Threat of new entrants:
Services are usually facing difficulties when it comes to capturing economies of scale, and the FinTech sector is no exception. With the wide variety of unique financial solutions, more often than not tailored to the specific needs of the customer, it is extremely difficult to reduce costs by applying economies of scale. This means that both current and potential competitors are struggling to reduce costs, which is not favorable for new entrants.

There are many factors that determine the threat of new entrants. Currently, the Mexican FinTech market represents a great opportunity for innovation in technology and finance, allowing higher product differentiation. Additionally, the rapid penetration of Internet and technology makes the country one of the most fertile territories for investment, with 25% of the investment for risk capital in IT going to FinTech startups.

Due to the current psychological aversion for risk and the huge amount of
money required, the majority of these startups will not be able to succeed on their own without investment or crowdfunding – making it difficult and costly for new competitors to enter the market.

Fintech Radar MexicoAccording to Finnovista, 63% of the Mexican FinTech startups confirm that they have received third-party investment, but despite the fertile terrain in the country for startups, the entry barriers are relatively high. This is due factors such as elevated costs for developing digital financial
services, elevated startup costs, high customer switching costs, etc.

Bargaining power of suppliers:

The ability to negotiate with suppliers is extremely important, which can
be described as market of inputs. The Chart on segment growthmajority of FinTech companies in Mexico are focused on payments and remittances, personal financial management, crowdfunding, and lending, among other segments.

Due to the variety of FinTech segments present in the market, the bargaining power of suppliers depend on factors such as: supplier switching costs relative to firm switching costs (high in FinTech), impact of inputs on cost and differentiation (which in this case is highly variable), the presence of substitute inputs, the supplier concentration
to firm concentration ratio (Mexico city provides the best ratio), and
supplier competition (the ability for vertical integration and buyer cutting).

In other words, the main suppliers of this industry are banks, financial service corporations and other tech companies. Due to the fact that there is a wide variety of bank and financial services choices, these suppliers provide a good amount of financial alternatives.

In relation to the location of this industry, México City is the home for the majority of FinTech startups, hosting 71% of them, followed by Monterrey (11%) and Guadalajara (10%). Curiously, only 10% of them operate beyond Mexican borders, which is a key factor when it comes to choosing suppliers.

Bargaining power of buyers:
FinTech is rather a particular industry when it comes to analyzing buyers, because there is not a single product being sold, as opposed to consumer goods industries. As FinTech offers both B2B and B2C services, the analysis is bi-dimensional based on both types of clients.

First, if we take a look to how the market is comprised regarding non-corporate buyers, we find out that 83% of it accounts for SME and individual consumers, as seen in Figure 4 of the Annex. This provides valuable information considering that there were approximately 5.6 million SMEs in Mexico as of 2014, the majority of which were micro-enterprises (94.3%).

So, this means that there are many buyers purchasing small quantities relative to the size of a single seller, which makes them lose bargaining power. On the other hand, the power of the buyers consists of low switching costs and fees.

In the B2B dimension, banking and corporate firms account for 17% of the market. Mexico has 48 banks operating in the country, but unlike the SMEs and individuals, they do have the power to demand large quantities relative to the size of single sellers. A reduced group of banks and other financial institutions have great leverage amongst providers. Additionally, banks demand tailored solutions from FinTech companies, which reduces the possibility of easily changing to the competitor for the same product.

Finally, it is quite difficult for buyers to credibly threaten to backwardly integrate into the industry. It is true that big banks and financial institutions have the capability to develop the technology and infrastructure to fulfill their fintech their needs, however, it is not as simple as investing time and money. Backward integration would deem necessary major research and development, making it cheaper, faster and smarter to simply attend to the existing firms on the market.

Threat of Substitutes products:
The threat of substitute products is a key force to consider when you analyse the industry environment or design a competitive strategy. This threat is high if the substitute service offers an attractive price-performance trade-off and the buyer’s cost of switching to the substitutive service is low.

Despite being the most logical substitute to FinTech, traditional financial services such as face-to-face payment transactions, cash, and checks, don’t offer the same convenience and time-efficiency as their online alternatives. The rapid digitalization and the implementation of technology in financial services allow them to enable purchases 24/7 from any corner of the world, even if the desired shop doesn’t have a physical location.

For these reasons, the products offered by the Fintech industry are more attractive to the consumer as they are safer, easier to use, have a lower cost and are more versatile methods adaptable to consumer needs.


The researched conducted by our group revealed a surprisingly high attractiveness of the FinTech industry due to the early stage of its development, associated with high entry barriers, reduced competitiveness, a wide variety of unique digital solutions, and the convenience and cost-efficiency that they provide to customers.

Despite the huge amount of capital and expertise required for FinTech startups to enter the market, and the fact that they wouldn’t survive without third-party investment, once they cross the high entry barriers, they will face relatively low competition and will be able to fight for a big share of the market. Additionally, the process of digitalization and the implementation of technology makes traditional financial services obsolete and incomplete to satisfy the customers’ demand. And finally, the favorable bargaining power of both suppliers and buyers gives a slight competitive advantage for FinTech companies, due to the fact that they are the core for the development of advanced financial services.