The rise of digital banks, also known as neobanks, is changing the banking landscape in Mexico. Unlike traditional banks, these institutions are backed by established banking institutions such as Santander, Banorte, Banregio and Invex. This backing means that customers who choose to save their money in these digital institutions are also supported by higher deposit insurance offered by the Mexican authorities as compared to popular financial companies like Sofipos.
Digital banks offer a range of services from opening accounts to obtaining loans, making them a convenient alternative to traditional banks. In order to qualify as a bank, these institutions must be licensed by the National Banking and Securities Commission (CNBV). For example, Banregio has been a key player in promoting 100% digital banking and launched Hey Banco, an application that started with providing debit and credit cards. Similarly, Nu entered the Mexican market by offering credit cards and subsequently acquired Sofipo to expand its product offerings.
The rapid growth of digital banks in Mexico has led other institutions to follow suit. Ualá, Invex and Affirme are some of the financial companies that have launched or are planning to launch digital banking options. Even large international banks like Santander are gearing up to introduce their digital banking services through Open Bank, which already has its license.
One of the main differences between traditional banks and Sofipos is the level of deposit insurance they offer. A bank’s deposit insurance, backed by the Institute for the Protection of Bank Savings (IPAB), provides higher coverage as compared to Sofipos. While OTPs have the support of the Fund for the Protection of Popular Financial Companies and the Protection of their Savers (Prosofipo), the coverage they offer is lower.
Some traditional banks like BBVA have chosen not to open separate digital banks but instead moved all their services to their existing application. This approach reduces the need for additional licenses and investments as most capital injections are directed towards technology.