Latin America is experiencing a wave of transformation in digital payments, with Mexico leading the way. According to Devie Mohan, the renowned global influencer in fintech, “we believe that Mexico will see a major fintech boom in 2025 or 2026.”

Unlike regions where cash and card use dominate, Mexico’s digital-native population is driving significant growth in electronic payments. Key factors, such as infrastructure investment in SMEs and the increase in payment terminals, are laying the groundwork for fintech expansion. With the example of Qatar’s recent adoption of digital payments for events like the FIFA World Cup, Mohan highlights how these technological advances could similarly impact the Mexican market over the next two years.

The growth of digital payments in Mexico is also accompanied by an increase in esports, another sector with fintech potential. Mohan stresses that both sectors will attract more fintech interest in the coming years.

Banks and fintech: the battle for customer acquisition

Traditional banks in Latin America are facing stiff competition from fintech companies. Mohan explains that «almost 30% of the world’s revenue is now impacted by fintech, causing banks to compete with fintech for customer acquisition.» Despite the widespread presence of digital strategies, few banks have effectively implemented them. In fact, less than 20% have successfully executed their strategies, leaving them vulnerable to fintech firms that excel in digital innovation.

Banks in countries like Mexico, Colombia, and Argentina are struggling to keep up. Although they may have a digital strategy on paper, implementation remains a challenge. In Mexico, the adoption of a fintech framework, regulatory sandbox, and cryptocurrency regulations show progressive regulatory developments. This regulatory stability is essential for fintech growth, with other countries in the region, such as Chile and Colombia, looking to Mexico as a model.

Collaborations, partnerships, and new opportunities

In Latin America, the number of partnerships between banks and fintechs is still low, yet these alliances are essential for industry growth. Mohan points out, «if Tier One banks are forming partnerships, it’s a good sign,» highlighting that the trend of partnerships is advancing, especially in the post-COVID era. Traditional banks, often slow to innovate, are increasingly seeing the value in collaborating with fintech companies to meet the evolving needs of customers.

The rise of digital banks, or «challenger banks,» represents a fundamental shift in the financial landscape. Mexico, with four to six potential new digital banks entering the market this year, is poised to become a leader in Latin American fintech. Traditional banks in the region are feeling the pressure, with 62% of Latin American banks expressing concern about the competition from fintech firms.

Mohan also emphasizes the role of major tech companies in the region. Companies like Amazon, Google, and Apple are increasingly partnering with banks and telecom firms to introduce new financial products, targeting Millennials and Gen Z. She notes that partnerships between tech giants and financial institutions, especially in microloans and credit for small and medium enterprises, offer growth opportunities.

SME lending and embedded finance

One of the most promising areas in Latin American fintech is lending to SMEs. Traditional banks serve only about 10% of the market, leaving a significant gap that fintech companies are eager to fill. Mohan mentions, “of the $1.2 billion in microloans provided last year, fintech companies accounted for 25% of the market.” The potential for growth in SME lending is enormous, especially in Mexico, where interest rates are high but are expected to decrease over the next few years.

Mohan also highlights the concept of embedded finance, which integrates financial services directly into digital platforms, offering consumers a seamless experience. For example, Uber drivers in Mexico can access loans and financial services directly through the Uber app, thanks to partnerships between banks, fintechs, and tech companies. This trend reflects a growing collaboration between various sectors to provide innovative financial solutions.

The future of fintech in Latin America

The future of fintech in Latin America looks promising, with Mexico emerging as a key player. In Mohan’s words, «Mexico is expected to overtake Brazil next year in terms of digital banks and fintech activity.» Regulatory support, such as the fintech framework and regulatory sandbox, will be crucial in sustaining this growth. Additionally, the underbanked population in Mexico represents a substantial opportunity for fintech companies, as they provide services that traditional banks have failed to offer.

The fintech revolution in Latin America is set to reshape the financial landscape, with digital payments, SME lending, and partnerships between banks, fintechs, and big tech companies at the center of this transformation. The entry of companies like Alipay and Tencent into the Mexican and Brazilian markets, respectively, signals a new era for the region’s financial sector.

As fintech companies continue to innovate and expand, the traditional banking sector must adapt to meet the evolving needs of consumers. The growth of digital banks, partnerships with tech companies, and the rise of embedded finance are all signs that Latin America’s financial future will be increasingly digital.