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Alternative Credit Scoring of the Unbanked Population in Mexico

Discover the key trends in Mexico's economic development, their impact on the lending industry, and the role of alternative scoring.

Artem Lalaiants
CEO @RiskSeal
Table of contents

Mexico is one of the countries with the lowest banking services penetration in Latin America. According to Mexico's National Institute of Statistics and Geography, only 49.1% of Mexicans aged 18-70 have a bank account.

This situation prevents residents of this country from fully utilizing lending services. Traditional banks base their lending decisions on credit history and borrower ratings, which half of Mexico's adult population lacks.

Growth and challenges in Mexico’s economic system

World Bank says that Mexico is among the top 15 countries with the largest economy and is the second-largest among Latin American countries. Its GDP is $1.414 trillion, second only to Brazil's:

Mexico's GDP diagram

At the same time, 36% of this country's population has low income levels, and its economy lags behind states with similar economies in terms of inclusiveness, development, and poverty reduction.

Insufficient access to traditional banking services and the crisis resulting from the COVID-19 pandemic have led to the growth of the fintech market in Mexico. 

A comprehensive study conducted by Santander Mexico shows that the fintech ecosystem consists of 515 companies, 266 of which have been created in recent years.

According to experts' forecasts, the financial technology market of this state will continue to develop, demonstrating a CAGR of 14.2% over the next eight years.

It is worth noting that lending is the most popular fintech sector in Mexico. It accounts for 25% of all fintech businesses there. Payment and remittance providers rank second, and companies dealing with enterprise technologies for financial institutions rank third.

The fintech industry in Mexico analytics

The rise of alternative credit scoring in Mexico

Research published by Mexico Business reveals that 7 out of 10 Mexicans cannot obtain credit from traditional banks because they lack access to banking services.

They prefer cash transactions and do not use credit cards and other banking products. This prevents tracking the financial activity of these citizens, namely their transaction history.

To address the issue of unbanked Mexicans, fintech companies utilize alternative data sources.

Beyond traditional credit history and borrower ratings, this data includes mobile operator records, utility and rent payment history, and other non-traditional sources. This information is used to assess the creditworthiness of potential borrowers.

Using digital footprint analysis as a source of alternative data is particularly relevant for credit organizations in Mexico. 

The reason is that a large part of the population of this country are active internet users. According to Statista, in 2023, there were 96 million of them, accounting for over 75% of the country's population.

Internet users in Mexico

The number of Internet users in Mexico is expected to exceed 131 million by 2029.

Practically every active internet user in Mexico has accounts on social networks. Data published on Statista confirms this:

The number of social network accounts in Mexico

Paid streaming services are also highly popular among Mexicans. Among the most popular are Netflix, Amazon Prime, and Claro TV:

Paid streaming services in Mexico

Online taxi calling services are also widespread in Mexico. Mordor Intelligence forecasts a CAGR of 5.02% for this market over the next 5 years:

Mexico ride-hailing market growth diagram

Such online activity of Mexicans opens up significant opportunities for digital footprint analysis.

Traditional and alternative scoring in Mexico: how does it work?

Traditional credit scoring in Mexico utilizes borrower credit history data from the Official Credit Bureau—Buró de Crédito to make lending decisions.

In Mexico exists a private credit bureau in the country—Circulo de Crédito. It employs FICO scoring models to assess consumer creditworthiness. The difference is that the FICO system can consider the credit history of different family members when evaluating an applicant.

However, even this may not be sufficient to receive a positive response to a credit application. 

If the borrower and their family do not meet the requirements of traditional banks, they should consider an alternative means of obtaining credit.

Digital credit scoring in Mexico involves using data from various non-traditional sources to assess the creditworthiness of applicants.

Mexico Business News mentions common alternative data sources used in Mexico:

Type of alternative data Information sources
Financial information (besides credit history) 1. Transaction history on savings and checking accounts. 2. Analysis of the relationship between income and expenses to assess risk.
Tax information Tax Administration Service (SAT).
Digital footprint analysis 1. Activity on social networks. 2. Payments for subscription services. 3. Online delivery and taxi calling services (e.g., Uber or Rappi). 4. Activity on gig economy platforms. 5. Purchases on e-commerce platforms.
Other data Information on insurance and investments.

Such a broad spectrum of alternative data allows lending organizations in Mexico to create a more comprehensive financial profile of consumers and extend credit to applicants without a credit history or with insufficient credit ratings.

How RiskSeal data helps lend to the unbanked population in Mexico

While Mexican credit bureaus have data on only 49% of borrowers, RiskSeal can evaluate the creditworthiness of up to 83% of Mexicans.

We offer our clients access to 120+ online services for digital footprint analysis. 

In addition to these, we also provide data from the regional platforms:

  • Taxi and delivery services: DiDi, Rappi. 
  • Telco: Telcel, AT&T.
  • Job portals: Indeed, Computrabajo. 

We've highlighted some of the largest Mexican platforms we utilize, but we also work with numerous smaller, niche services. For more information on these, please contact us.

We analyze a potential borrower’s name, phone number, email, and IP address. Then we provide a lender with over 300 data points and a pre-made digital credit score. 

We continuously expand our sources of alternative data for Mexican financial institutions. The information provided in this article is up-to-date as of April 2024.

FAQ

Why are fintech services increasingly popular among Mexico's population?

Half of Mexico's adult population lacks access to banking services and, consequently, cannot obtain credit from banks that rely on traditional credit scoring. 

As a result, credit-invisible Mexicans turn to fintech services that utilize alternative data for credit decision-making. Such data includes information on social media activity, mobile usage, online platform payments, and more.

How does credit scoring work in Mexico?

There is traditional and alternative credit scoring in Mexico. The former assesses a borrower's creditworthiness based on their credit history, which is provided to banks by Mexico's Official and private credit bureaus.

Alternative credit scoring in Mexico involves evaluating applicants based on non-traditional data that goes beyond credit history and traditional credit ratings.

Why are alternative data crucial for Mexican fintechs?

Alternative data plays a vital role in Mexican fintechs' operations because it allows them to expand their target audience. By using alternative data, credit organizations can more accurately assess potential borrowers and lend to Mexico's unbanked population.

How many people in Mexico are unbanked or underbanked?

According to Mexico's National Institute of Statistics and Geography, over 50% of Mexico's population is unbanked or underbanked. 

They lack access to basic financial instruments, including bank accounts, traditional loans, and insurance. This is why lending organizations in the country that utilize alternative credit scoring are so prevalent.

What makes digital footprint analysis particularly relevant in Mexico?

The majority of Mexicans are active internet users. 75% of the country's population has internet access, and almost every one of them has accounts on social media platforms. Additionally, online food delivery and taxi-hailing services are popular, as are paid television and other streaming services.

This diversity of alternative data opens up broad opportunities for digital footprint analysis.

How is RiskSeal adapting its services for the Mexican credit market?

RiskSeal offers Mexican financial institutions access to 120+ online services for digital footprint analysis, including local platforms such as taxi and delivery services (DiDi, Rappi), telco (Telcel, AT&T), and job portals (Indeed, Computrabajo).

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