Can DiMo Promote Financial Inclusion in Mexico?

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    The new user-friendly RTP system could have 5 million users by next year and support the expansion of financial inclusion.

    DiMo and financial inclusion in Mexico

    Launched in March 2023 by the Mexican Central Bank, Dinero Móvil or DiMo is a service that enables users to make instant bank transfers through the country’s real-time gross settlement system — known by the acronym SPEI — by using only a recipient’s phone number. Because DiMo will offer a much more user-friendly experience than previous solutions, experts and major players in the industry think that the new scheme can take further advantage of the population’s increasing digitalization and get Mexicans to gradually use less cash.

    4 Factors That May Determine DiMo’s Success

    The first factor is already set: smartphone penetration. In 2018, only 56% of Mexico’s population had access to an internet-enabled mobile device. But in 2023, 71% have this access and by 2025, 75% of Mexicans will have access to a smartphone.1

    Smartphones users in Mexico

    The other three factors — number of participating entities, good user experience and a low or zero-fee P2P payments — however, are under construction and depend more on the industry than on regulatory authorities.

    Unlike Brazil’s Pix, participation in DiMo is not mandatory for all financial institutions, so this poses a challenge to the new service’s reach. On the other hand, all banks and financial service providers seem enthusiastic about the new scheme since day one. “What we can say from HSBC’s perspective is that we are going to get on board [with DiMo], and we know that other banks will follow suit,” said Jorge Arturo Arce, HSBC Mexico’s Chairman, during a press conference of Mexico’s Bank Association ABM in August.2 Arce believes that customers themselves will expect that banks connect to DiMo and that this will accelerate the growth of the solution’s network.

    DiMo participants as of October 2023. It includes banks such as BBVA, Santander and Hey, as well as non-banks as Finsus.

    The four current participating institutions (see above) have a combined reach of nearly 30 million accounts in Mexico, although the actual number of DiMo users is undisclosed so far. The total number of accounts connected to DiMo is expected to at least double by 2024. In addition, non-bank players, including fintechs and retailers, are also expected to boost DiMo’s adoption pace.

    Mexico’s largest bank, BBVA, became the first institution to enable DiMo, followed by Santander. By partnering with STP, Finsus, a fintech that offers investing and credit services, became the first SOFIPO to offer DiMo to its 110,000+ clients.3

    The main characteristics of participants in the DiMo landscape in Mexico, by type of institution, connection, the number of accounts, banking deposit share and banking clients share.

    The UX factor is likely to help in the network’s growth. Created in 2004 and operational on a 24/7 basis since 2015, SPEI is used heavily for financial institutions and businesses but has been slow in winning over Mexican consumers for every day, low-value payments. Not a long time ago, payers had to know the payee’s so-called Standardized Bank Code (Clave Bancaria Estandarizada or CLABE, as per the Spanish-language acronym), an 18-digit number, to make transactions within the system. The other option was to enter the payee’s 16-digit debit card number. Now with DiMo, the only information payers need from payees to make a transfer over the SPEI network is their cell phone numbers.

    In 2019, Codi — a service that allowed SPEI bank transfers via QR code or NFC — was launched. It was mainly intended for P2P and P2M physical transfers, but it was not fully embraced by participating banks. In addition, the small merchants who were the main target of the feature did not adopt it partly because they were afraid that they would be taxed for using it.

    The main differences between DiMo and CoDi in Mexico. Date of launch, RTP scheme, bank adoption, and target segment.

    DiMo is more than an evolution of all these previous solutions. It’s a true game-changer for digital payments in Mexico — and the country’s main financial institutions are already acknowledging this. While banks are not obliged to participate in DiMo, those that already do are voluntarily promoting the service with the aim of attracting new customers, as is the case with BBVA and Santander. In addition, banks can charge for these transactions, so they have a financial incentive to participate in DiMo.

    In DiMo’s first year of operation, BBVA expects to onboard 5 million users— more than all active Codi users combined — and transact over US$ 560 million, which is more than six times the volume forecasted to be transacted through Codi.

    Additionally, Banxico has relaxed regulations to encourage financial and payment institutions to open more level 2 transactional accounts. These are accounts with a monthly deposit limit of around US$1,150 and a simplified onboarding process with minimal YC. These accounts are aimed at including more Mexican adults in the banking system. Additionally, via DiMo’s own app, consumers will be able to open a bank account at a participating institution of their choice, the first feature of its kind seen in Latin America.

    In the case of BBVA, level-2 transactional accounts increased by 39% in the first quarter of 2023 compared to the previous year, representing more than half the level-2 accounts in the country. This is due to a combination of BBVA promoting these accounts and the desire by consumers to access DiMo.

    Entities are also finding ways to improve DiMo’s already friendly interface. Finsus, for example, is advertising a less than 10-minute onboarding for new users who want to access DiMo.

    An affordable fee policy is also a critical issue for DiMo’s success. Zero cost to consumers has already proven to be decisive in the degree of adoption and expansion of other real-time payment systems around the world. For now, participating banks are not charging for transfers using DiMo but they have signaled they might begin doing so in the future.

    With wider smartphone usage in Mexico, simpler processes, and a cash-like user experience, we at PCMI believe DiMo is poised to drive digital payments usage. As digital payments scale, especially free P2P payments, this can naturally attract underbanked and unbanked consumers to the system. As more banks and fintechs participate and offer free, simplified transactional accounts, this combination could drive the unbanked to open their first accounts, potentially helping Mexico to achieve 80%+ financial inclusion, like the other large economies in the region (Brazil, Colombia, Argentina, and Chile).  DiMo could be the gamechanger that so many in Mexico have been waiting for.

    Next Steps

    Contact us if you’re interested in an opportunity benchmarking study to understand how your company can best take advantage of DiMo as it expands its reach in Mexico. We can also help with a landscape study to evaluate DiMo in the context of Mexico’s payments ecosystem, survey customers to better understand their interest in adopting the service or deliver data on the service’s impact in the near term and long term.

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    1. INEGI’s Encuesta Nacional sobre Disponibilidad y Uso de Tecnologías de la Información en los Hogares (ENDUTIH, 2022), GSMA The Mobile Economy Latin America (2022), PCMI analysis ↩︎
    2. Association of Mexican Banks Press Conference (August 2023). ↩︎
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    Andreas Farge
    Andreas Farge

    Expert in digital payments in LatAm & emerging markets.