The administration of Mexican president Andres Manuel Lopez Obrador, who was elected in December 2018, has announced measures to help make financial services more affordable in a country in which over half the population is unbanked. The government intends to launch a pilot for a digital payments system known as CoDi as early as next month, according to a news report. The platform is to be built and run by Mexico’s central bank and will enable Mexicans to make and receive payments through their smartphones, free of charge.

To use CoDi, consumers must have an account with an institution participating in Mexico’s existing interbank payments system, which will power the new platform. Current members of the system include established institutions such as BBVA’s Bancomer, Banco Santander and Citigroup’s Citibanamex. “In the future, it will no longer be necessary to have a bank in the sense of a traditional, established bank,” said Mexico’s deputy finance minister Arturo Herrera. “Mobile phones will become banks.” He added that the Lopez Obrador administration plans to transition to direct deposit or digital wallets to dispense welfare benefits over the next 18 months.

Tarifica’s Take

The Mexican government’s announcement of a digital platform for mobile payments nationwide is a step in the right direction for a country with half the population unbanked, but it appears to leave the door open for mobile operators to establish their own mobile money services in Mexico, which might help the unbanked even more.

The CoDi system, as described, is founded on banks—the state central bank as well as other well-established financial institutions, some of which are based outside the country. In order to use it, customers must already have an account with one of these participating banks. That hardly solves the problem of the unbanked. Presumably the system will reduce banking costs, which is expected to make it more attractive for consumers to get bank accounts and enter the banking system.

However, mobile money systems established by mobile operators—such as M-Pesa and numerous others worldwide—offer consumers ease of payment without any need to have a bank account, and rather than just lowering costs, they can eliminate the costs entirely. Furthermore, many unbanked consumers are suspicious of banks or intimidated by them, whereas they often have confidence in their mobile operators and sense of ease of operation in dealing with mobile technology.

Unlike in, say, Kenya, in Mexico MNOs cannot set up mobile payment services independently of the state banking system. But even though any expansion of mobile banking in Mexico would have to be bank-led, having MNOs spearhead the process by partnering with banks would seem to promise greater ease of access and a higher level comfort for the unbanked than a system established directly by the government that requires users to establish bank accounts. In underserved markets across the globe, mobile money platforms that integrate money transfer functionalities with mobile service billing have been eagerly embraced by consumers.