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Neobanks collaborate with established institutions to challenge fintechs


Feb 12, 2024

Digital banks, also known as neobanks, have become a reality. Some of these banks are just beginning to offer basic products and services, while others are already allowing customers to request and obtain car loans from their cell phones. Unlike popular digital financial companies (Sofipos), neobanks are backed by established banking institutions in Mexico such as Santander, Banorte, Banregio, and Invex. This backing means that people who choose to save their money in these digital institutions are also supported by higher deposit insurance offered by the Mexican authorities as compared to popular financial institutions.

Digital banks are essentially a virtual version of traditional banks, offering a range of services from opening accounts to obtaining loans. In order to qualify as a bank, these institutions must be licensed by the National Banking and Securities Commission (CNBV). Banregio, for example, has been a key player in promoting 100% digital banking and launched Hey Banco, an application that started with providing debit and credit cards. Similarly, the Brazilian company Nu entered the Mexican market by offering credit cards and subsequently acquired a Sofipo to expand its product offerings.

The rapid growth of digital banks in Mexico has led other institutions to follow suit. Ualá, Invex, and Affirme are some of the financial companies that have launched or are planning to launch digital banking options. Even large international banks like Santander are gearing up to introduce their digital banking services through Open Bank, which already has its license.

One of the differences between traditional banks and Sofipos is the level of deposit insurance they offer. A bank’s deposit insurance, backed by the Institute for the Protection of Bank Savings (IPAB), provides higher coverage as compared to Sofipos. While OTPs have the support of the Fund for the Protection of Popular Financial Companies and the Protection of their Savers (Prosofipo), the coverage they offer is lower.

Some traditional banks like BBVA have chosen not to open separate digital banks, opting instead to move all their services to their existing application. This approach reduces the need for additional licenses and investments, as most capital injections are directed towards technology.

As the digital banking landscape in Mexico continues to evolve, it presents an array of options for consumers and potential investors. With the support of established banking institutions and the convenience of virtual services, digital banks are poised to transform the financial sector in Mexico.

By Editor

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