By Erez Saf, CEO and Founder, CRiskCO
In every aspect, 2021 has been a year of growth for the Mexican economy. With a year preceding, such as 2020, when the COVID-19 epidemic began and halted growth, a negative economic prediction for 2021 was made if the previous year’s trend continued, but statistics proved the opposite.
Because of the pandemic’s effects, Mexico’s economy contracted by 8.3 percent in 2020, but it grew by 6.25 percent in 2021. The following table shows the trend of Mexico’s GDP over the past 10 years.
Source : https://www.investopedia.com/ask/answers/090915/mexico-emerging-market-economy.asp
FinTech investments in the Mexican market boomed in 2021. In the past year, unicorns, (recently established companies worth more than $1 billion), entered the scene in the country. Since last year, the number of fintech companies in Mexico has increased by 16 percent, accounting for nearly half of all financial technology startups in the Pacific Alliance.
Despite its status as an emerging industry, the Mexican market is currently beset by plenty of challenges. It’s vital to note that present circumstances, such as the COVID-19 pandemic, have had an impact on the country’s small and medium businesses’ growth, maintenance, and opportunities.
If properly implemented, technology may be a great ally in overcoming these difficulties and enhancing market conditions that favor SMB growth and boosting the economy.
Challenges
Access to credit
One of the most critical challenges that SMBs face is access to credit, and the use of credit in order to grow and build existing and new businesses. Given that 44% of SMEs seek funding to meet operating expenses and 56% need funds to expand their business or pursue other opportunities, waiting weeks or months for approval can have serious consequences, particularly in our current economic environment.
Currently, applying for a business loan is done manually, with a lot of different financial reports, phone calls, and visits to the branch, which is a time-consuming and costly process. As a result, many business owners are unable to get a loan, or often feel it isn’t worth the time to apply, making it very difficult for them to grow or even survive. Due to the time and effort required to complete this manual activity, many clients are turned down without further evaluation.
Reaching New Consumers in the Mexican market
Reaching new customers in a booming market like Mexico is a major challenge. As the economy grows, businesses want to reach out to more customers, and break out from the physical limitations of proximity to clients. but doing so in a secure and safe manner is difficult and requires planning. To meet this challenge, businesses must have a complete strategy in place and work with the proper partners.
So, how can Mexican small and medium businesses take advantage of the circumstances to grow their businesses and overcome these challenges?
Technology can be the answer and open new opportunities
Undoubtedly, technology can assist firms in operating more efficiently. Recent technological developments have the potential to significantly improve how business owners operate and provide SMBs with growthand maintenance opportunities.
If properly implemented, technology may be a great ally in overcoming these difficulties and enhancing market conditions that favor SMB growth and boosting the economy.
Small and medium businesses require financing to expand and maintain their operations. To efficiently accomplish this, lenders and applicants must have better tools for promptly and securely approving loans. With digital credit risk decisioning solutions, SMEs can apply for loans online. Using traditional and alternative sources of data, lenders can expedite decisions without increasing their risk, and approve loans quickly. Lenders benefit from platforms and solutions that enable them to collect data about potential borrowers from a variety of sources in order to make more accurate risk judgments faster. A big advantage for Mexican businesses and lenders is the SAT and the availability of SAT API data that can create a reliable financial profile of a company digitally and in a short time.
By using the available technology, lenders save time and money, analyzing more businesses for loans and expanding their portfolio. The transition from a physical to a digital process benefits the business owners since it eliminates erroneous discrimination and allows for a more objective examination. With the use of technology in underwriting, more business owners will get approved, and see the money in the bank quickly so they can survive and grow.
Technology also can help us expand our client reach and allow more clients to buy more. First, implementing more ways for your clients to pay can grow the business. Implementing Point of Sale (POS) software/hardware can allow credit and debit card transactions. There are many new and experienced POS providers in Mexico and implementing it today can be as easy as downloading an app. POS transactions can take place in person or online, thus preparing the business for another expansion into E-commerce.
Implementing E-commerce can help the business reach a larger audience. Due to COVID-19, the use and purchase online with e-commerce platforms has been in steady increase, creating new opportunities and customers looking for solutions. Using E-commerce, business owners will not encounter market limitations, clients will have more flexibility, the purchase process will be faster and easier, and expenses will be reduced.
Conclusions
Despite the fact that the Mexican market is growing, small and medium-sized enterprises encounter many difficulties. The lack of access to financing and keeping up with the country’s economic growth are all significant issues businesses need to address.
It may sound cliche to argue that we should embrace our obstacles and convert them into opportunities, but that is exactly what we should do in this case. And, in the twenty-first century, having technology as an ally is essential to accelerating the growth of Mexican businesses in 2022.
CRiskCo brings together small and medium businesses and professional credit providers with Credit Risk Analysis, Management and Matching platforms for both lenders and borrowers. Lenders can use CRiskCo’s APIs to connect to SAT data and extract from SAT API a detailed risk analysis using AI and Machine Learning. Learn more about how Provenir and CRiskCo can enable lenders easily on the Provenir Marketplace.
Sources
https://www.bizlatinhub.com/mexico-fintech-industry-grows-16-during-pandemic/ https://www.investopedia.com/ask/answers/090915/mexico-emerging-market-economy.asp
https://www.bloomberglinea.com/2021/12/23/2021-mexicos-year-of-unicorns-and-a-startup-investment-boom/