Mexico’s banks handed out millions of cards that nobody wants

When Uber launched in Mexico 13 years ago, it ran into an unexpected problem. Plenty of people had smartphones to download the app, but few would pay with a bank card: they either didn’t have one or didn’t want to use it.

Within a few years, the ride-hailing giant rolled out a cash option, and that’s still how more than half of its riders in the country pay.

That statistic reflects a broader pattern: in Mexico, a surge in the variety of financial products on offer has been met with a stubborn reliance on banknotes and coins. In many ways, digitally enabled convenience has been no match for culturally ingrained attitudes about money and a high tax-evasion rate, especially outside of big cities.

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On paper, the country is one of Latin America’s fastest-growing fintech markets, with more than 800 such companies operating there, up from fewer than 200 a decade ago.

Electronic payments have grown at double-digit rates as hundreds of millions in venture capital poured in, and roughly eight in 10 Mexicans now have at least one financial product, according to government data.

The Uber app allows cash payment in Mexico. Image: César Rodriguez/Bloomberg

And yet, more than half of debit cards in the country are untouched and nearly half of credit cards go unused, the data show. That’s partly because banks and fintech companies push them onto clients who use their other services, an issue so prevalent that Mexico’s lower house passed a bill last year banning fees on those unsolicited items.

Cash continues to dominate daily life: it’s used for about 85% of small purchases, according to government data.

Take Roberto Negrete, a 33-year-old construction consultant based in the State of Mexico. He manages almost all of his money in cash, a habit he inherited from his father.

When he gets paid, Negrete heads to Banamex, where he has a checking account. But instead of depositing the money, he trades his check for bills and stores them in a safe at home. He uses his bank account sparingly – mainly for expenses like Netflix or Apple Music that require electronic payment.

“I still prefer to handle everything in cash because it’s simpler and easier than having to declare my income, which would be tedious” and “confusing,” he said. “I don’t like depending on a financial institution to hold my money. I prefer to do things with my own hands.”

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Negrete, like many Mexicans, will make use of the financial system when necessary, but is reluctant to rely on it. At the center of this perspective is Mexico’s large informal economy, in tandem with a lingering distrust in institutions seeded by a banking crisis decades ago.

Roberto Negrete manages almost all his money in cash. Image: Alejandra Rajal/Bloomberg

Roughly 54% of the country’s workforce operates outside the formal system, shaping how people earn, spend and store money. Cash offers anonymity, while digital payments leave a trail that can expose users to taxes.

However, non-cash payments are getting more popular. In 2024, 19% of Mexicans preferred making purchases over 500 pesos (about $29) with a card, compared to about 12% six years prior, according to the central bank. Mobile or electronic payments were the go-to option for 7.6% of people, up from just 0.3% in 2018.

A sign reads in Spanish ‘Your Credit Cards Are Welcome’ outside a store in Tepic. Image: César Rodriguez/Bloomberg

“The most significant reason people do not go digital is the fear of tax scrutiny,” Emilio Romano, head of industry group Asociación de Bancos de México, said in an interview. That’s why many consumers prefer to pay in cash and many merchants prefer to receive it.

“Cash is the vicious cycle that fuels everything from tax evasion to illicit activities,” Romano said.

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The aversion to banks seems to get stronger the further one lives from a major urban centre. In Mexico City, a hub for fintech companies, about half of transactions are electronic, but cash still accounts for about 90% of payments in some southern regions, which tend to be poorer and more rural.

And Mexico stands out as a laggard when compared to Latin America as a whole. It’s the second-biggest economy in the region, but just 63% of adults have a bank account, according to government data.

In Brazil – Latin America’s largest economy – more than 90% of adults use Pix, an instant-payment system developed in 2020 by the country’s central bank that quickly became Brazil’s main method of payment.

While Mexico also has real-time payment systems, they coexist with older, slower networks, forcing businesses and financial institutions to navigate multiple channels to move money. Privately, many fintech companies say regulators have been slow to enact changes that would help drive adoption.

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Still, companies such as Nu Holdings Ltd, Banco Plata, Mercado Pago and Klar have managed to make headway after spending heavily in the market, adding millions of accounts across Mexico. Others have found the competition too stiff: last year, Grupo Financiero Banorte sold its money-losing digital bank to Klar.

In March, Femsa, one of Mexico’s largest retailers, cut hundreds of jobs at its fintech unit as it struggled to establish itself in a crowded market.

A sign reads in Spanish ‘No Card Payments Accepted’ at a store in Tepic. Image: César Rodriguez/Bloomberg

Tamara Caballero, CEO of Banco Multiva SA, said that heightened competition in the financial sector has pushed bigger, traditional lenders in Mexico to make strides on technology, including artificial intelligence, to retain its clients and attract new ones who may be reluctant to open a bank account.

“Digitisation is going to be the fundamental tool for achieving financial inclusion,” she said. It’s “better to be within the banking system and access financial products than continuing to be marginalised”.

Troubled past

Distrust in Mexico’s banking system is deeply rooted in peoples’ memories of the financial crises of the 1980s and 1990s, when banks shifted from state ownership to inexperienced private hands. That led to the collapse of institutions, which required a massive bailout at taxpayers’ expense.

Skepticism toward banks hasn’t fully faded since.

Government surveys show that only about six in 10 Mexicans believe financial institutions will safeguard their money and data, while barely more than half are confident their complaints will be resolved.

Some people also fear digital transactions. Grupo Elektra and Grupo Coppel both run retailers with in-store banks, giving them an advantage over fintechs among the country’s underbanked due to their thousands of locations across the nation.

“People trust the person, not the machine,” said Rubén Coppel, vice president of financial services at Grupo Coppel – which operates Mexico’s biggest privately-held retailer – and chairman of BanCoppel, the company’s banking arm.

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Cost and complexity also play a role. Moving cash into the financial system can be cumbersome, requiring a fee of about 20 pesos ($1.15) at convenience stores just to make a deposit. And for small businesses, accepting digital payments often comes with added expenses and logistical hurdles.

Mexico’s large informal economy contributes to credit cards going unused. Image: César Rodriguez/Bloomberg

However, those outside the banking system miss out on potential returns on their savings. While traditional bank accounts in Mexico often offer little to no yield, some fintechs – in an effort to attract new customers – pay out interest ranging from roughly 8% to 15%. All the while, the value of unbanked and uninvested cash declines as prices rise.

“There isn’t that much resistance once the money is already in people’s accounts,” said Carlos López-Moctezuma, CEO of BanCoppel. “The big problem is that money is born in cash for millions of Mexicans, and digitising it comes with a cost.”

Mobile-friendly companies struggle to convert the unbanked. While 63% of fintech firms say they serve underbanked users, only about a quarter report reaching people who were previously outside the financial system entirely, according to a survey by the Mexican Fintech Association.

But the consequences aren’t just personal, according to Romano, the head of Mexico’s banking association.

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“Formalising the economy enables economic growth,” he said. “An entrepreneur operating informally is an entrepreneur who cannot grow, because they must physically collect cash, cannot open branches, cannot establish a credit history.”

Industry leaders and policymakers are working to change this dynamic. Fintech firms are trying to lower user fees and make their products more seamless, while Romano said banks and the government are seeking to increase lending to around 45% of gross domestic product by 2030 from about 38% currently.

In April, Mexican President Claudia Sheinbaum announced an agreement to reduce fees on card payments at gas stations, her government’s latest push to reduce reliance on cash.

Negrete, the construction consultant, sees the writing on the wall.

“Someday I will go digital,” he said. “Not because I want to, but because I’m going to have to.”

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