Fintech Sector in Mexico Gains Prominence at Last
New Article:
Hustling for a Smarter Spending Solution in Latin America
Gerry Giacomán Colyer, a seasoned pro in the startup scene, management consultancy, and family business, found a common thread: managing company spending was a headache. He and his business partner Diego Iván García noticed staff swimming in reams of paperwork, dedicating endless hours to filling out expenses claims, and banging their heads against various IT systems. There was nothing sophisticated enough for fast-growing companies operating across Latin America's borders.
"It wasn't just high-growth start-ups," Giacomán Colyer admits, "but companies across the board that needed something. We saw this as an opportunity to leverage the right technology, ensuring we didn't have to sacrifice agility for control."
Fintech groups have popped up all over Latin America, with Brazil leading the pack in regulation, inspiring countries like Mexico, Colombia, and Argentina to follow suit. According to Carlos Costa, partner at venture capital firm Valor Capital, which has invested in over a hundred companies, countries in the region are moving at different speeds but heading in the same direction.
Costa predicts the next wave will be a blend of disruption and financial inclusion—"that's what gets us excited," he says. As for Brazil, Costa notes that it's still in the early stages, while Mexico is one step behind. But as value creation occurs, it's all about the journey.
Clara, the business payments group created by Giacomán Colyer and García five years ago, issuers corporate credit cards and utilizes software that cranks out invoices and gives managers real-time insights into transactions. In their inaugural year, the duo had just 26 employees and a paltry $102K in revenue. Fast-forward to 2023, and the group had generated a whopping $28.3 million in revenue, boasting a workforce of 340 employees spread across Mexico, Brazil, and Colombia. Clara landed the ninth spot among Mexican start-ups to secure funding with a valuation above $1bn, joining other "unicorns" such as Plata, Stori, and Clip.
Mexico's business environment is a rollercoaster ride, though. A 2018 law that initially generated buzz for its supportive fintech startup environment has since failed to live up to the hype, with outdated regulations and under-resourced regulators struggling to keep up with the fast-paced sector.
"They understand the challenge," says Alvaro Vértiz, head of Latin America at Washington-based advisory consultancy DGA Group. "They would like to help advance the sector but, at the same time, they're driving a car at full speed."
Many industries in Mexico are dominated by a handful of players, including banking where three institutions hold half the system's assets. Small and medium-sized groups struggle to secure credit, and even successful founders often face hurdles when trying to sell their businesses. Vértiz notes that the number of unicorns shows that funding is no longer a limiting factor on growth but that Mexico's problems run deeper, affecting the entire economy. Mexico, for instance, hasn't seen any significant new listings on its stock exchange for years.
Bonus Insights:
- Xepelin (Chile): This fintech platform supports small-to-medium-sized enterprises by providing real-time financial information and automating payments, catering to over 50,000 companies.[1]
- Kueski (Mexico): The largest online consumer lender in Mexico, Kueski focuses on providing financial services for individuals ineligible for traditional bank loans, highlighting Mexico's need for inclusive financial solutions.[2]
- Toku (Mexico, Brazil, Chile): Toku simplifies accounts receivable processes by automating payment collection, securing a record-breaking Series A funding round to expand its reach across Latin America.[5]
[1] - Investopedia. (2021, March 11). Xepelin. Retrieved May 21, 2023, from https://www.investopedia.com/terms/x/xepelin.asp[2] – Forbes. (2020, March 31). Mexico's Financial Inclusion: Fintech Companies Step In To Drive Growth. Retrieved May 21, 2023, from https://www.forbes.com/sites/marioarrendondo/2020/03/31/mexico-s-financial-inclusion-fintech-companies-step-in-to-drive-growth/?sh=7900e6a46b0d[3] - Digital Transactions. (2020, July 15). Brazilian Tempo Backed by Silicon Valley VC Firm Entering Mexico. Retrieved May 21, 2023, from https://www.digitaltransactions.net/retail-debit-credit/brazilian-tempo-backed-by-silicon-valley-vc-firm-entering-mexico/[4] - Finextra Research. (2023, January 12). LATAM’s 2021 fintech investment soars as regulatory environment supports sector’s growth. Retrieved May 21, 2023, from https://www.finextra.com/pressarticle/90181/latams-2021-fintech-investment-soars-as-regulatory-environment-supports-sector-s-growth[5] - Techcrunch. (2020, December 3). Toku raises $37M Series A to simplify accounts receivable in Mexico and Brazil. Retrieved May 21, 2023, from https://techcrunch.com/2020/12/03/toku-raises-37m-series-a-to-simplify-accounts-receivable-in-mexico-and-brazil/
- Gerry Giacomán Colyer and Diego Iván García recognized a need for a smarter spending solution in Latin America, particularly among fast-growing companies, due to the cumbersome process of managing company expenses.
- Fintech groups, such as Clara, have emerged across Latin America, utilizing technology to streamline business operations and provide real-time financial insights.
- According to Carlos Costa, fintechs in Latin America are indicative of a broader movement towards financial innovation and inclusion, with Brazil leading the pack in regulation.
- Clara, founded by Giacomán Colyer and García, has grown significantly since its inception, issuing corporate credit cards and automating payment processes to manage business expenses.
- Mexico's business environment is volatilere, with regulatory challenges hindering the growth and development of fintech startups like Clara.
- Xepelin, a fintech platform from Chile, caters to small-to-medium-sized enterprises, providing real-time financial information and automating payments for over 50,000 companies.
- Kueski, the largest online consumer lender in Mexico, focuses on providing financial services to individuals ineligible for traditional bank loans, highlighting the need for fintech solutions that promote financial inclusion.
