Mexico is piloting a nationwide digital payment system

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Banxico, Mexico’s central bank, is beginning a pilot of Cobri Digital (CoDi), a free QR and NFC-based electronic payment system, with employees of major banks in the country, per NFC World.

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Participating banks include BBVA Bancomer, Citibanamex, Santander, Banorte, Baregio, and Fincomun, with more financial institutions expected to join the pilot ahead of its national rollout at the end of September.

Here’s what it means: CoDi uses QR codes through a user’s mobile phone, which are linked to their bank accounts.

Merchants can accept in-store payments through QR or NFC payments. We covered the central bank’s initial announcement of CoDi earlier this year, which it described as a way of making financial services more accessible to unbanked consumers.

Beyond promoting financial inclusion, the system is also meant to crack down on issues like money laundering, tax evasion, and corruption throughout Mexico. CoDi will eventually be a mandatory payment system for all banks, Deputy governor of the Bank of Mexico Gerardo Esquivel said, also calling it "very important in terms of financial inclusion."

The bigger picture: Mexico could mimic successful strategies of governments and payments firms in other markets that tapped mobile phone-based services to drive financial inclusion.

Nearly 42 million consumers in Mexico are unbanked — but the country has 55%smartphone penetration. An estimated 90% of transactions are made in cash, largely because of the unbanked population. CoDi could have the same impact that services in other markets have had on financial inclusion. Kenya, for example, is the birthplace of mobile money, exemplifying the ability to successfully use high mobile penetration to drive noncash payments among underbanked consumers: The technology has enabled Kenya to reach the highest bank account penetration in Sub-Saharan Africa.
CoDi could also enable e-commerce to take off rapidly in Mexico. There were previous reports of Amazon’s involvement in the development of CoDi, which would help streamline e-commerce in Mexico — something that’s historically been inhibited by low card penetration. If Amazon does take a role in the payment system, it’d be a familiar strategy: Last year, Amazon launched a debit card, Amazon Rechargeable, in Mexico, in an effort to encourage consumers without bank accounts to shop on its website.
But there are hurdles to financial inclusion that will have to be addressed to ensure the system reaches its intended audience. In theory, a free service like CoDi would be well received, given that fees are one factor that’s held people back from opening bank accounts. However, CoDi requires users to have an account with one of the participating banks; so even though the system is free to use, banks might need to make their accounts more affordable and accessible in order to access the underbanked population and achieve the results they’re setting out to. Further, despite having overall high mobile penetration, basic infrastructure for cell phone service is missing in some remote areas on Mexico, and limited cellular service could inhibit consumers from using CoDi regularly.

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