Mexican Regulator Says Credit, Debit Processing Too Highly Concentrated

According to Mexican regulators, the two companies in charge of the country’s credit and debit settlements represent “a near monopoly,” and big businesses need to sell shares in those companies, the Associated Press (AP) reported.

The regulators have recommended that the eight private banks which own large shares of the settlement and process firms sell them, as regulators said they have an unfair advantage, according to the AP.

Because of the lack of competition, the federal Commission on Economic Competition said the processing fees have gotten too high and incentives have been lowered for investing in new systems that could be safer for handling transactions and avoiding breakdowns. In addition, Mexican payment systems often break down and make it more difficult to use cards. Fraud is also highly typical because of this, the AP reported.

The high fees as well as bad service have kept customers and smaller businesses locked out of the card transaction system, the AP reported, and it often takes as long as four to six months to open a bank account there.

The commission has said there are also other issues, including lengthy and confusing methods for new firms seeking to get into the market. Because of that, the commission has called on the Mexican government to ease restrictions for companies.

PYMNTS reported earlier this year that Mexican small- to medium-sized businesses (SMBs) are in need of a more comprehensive overhaul as opposed to adding more banks as some suggested, according to Vilash Poovala, founder and CEO of FinTech Oyster. Poovala said the country’s cumbersome banking process is easy to see up close as he had to make Oyster in order to get properly banked.

Poovala said Oyster is able to fill a certain niche because many other banks don’t view debit cards as a necessary strategy, so there is room for Oyster to offer freelancer bank accounts and smart accounts that can be activated within 24 hours after identity verification.