Consolidated institutions backing neobanks as they combat fintechs

The Rise of Neobanks in Mexico: Backed by Traditional Banks, Offering More Deposit Insurance and Greater Convenience

Neobanks, or digital banks, have gained significant popularity in Mexico. Unlike other virtual financial institutions, neobanks are backed by established banking institutions such as Santander, Banorte, Banregio and Invex. This support extends to deposit insurance which is much higher in traditional banks compared to virtual financial companies.

To be classified as a bank, digital banks must be licensed by the National Banking and Securities Commission (CNBV). Hey Banco, a product of Banregio offers services such as debit and credit cards, personal loans and high-yield savings. Nu, a Brazilian neobank has also made considerable progress in the Mexican market by expanding its offerings to include personal loans and savings products.

The success of Hey Banco and Nu has led other institutions like Ualá, Invex and Affirme to launch their own digital banking platforms. Even established banks like BBVA and Banorte are entering the digital banking space with their own offerings. These digital banks provide greater deposit insurance compared to virtual financial institutions in case of bankruptcy.

Some traditional banks like BBVA have opted to focus solely on mobile apps instead of launching a separate digital bank. These banks see technology investments as crucial to their success in the digital age.

As the digital banking landscape continues to evolve in Mexico, consumers are presented with a wide range of options for managing their finances from traditional banks with mobile apps to fully virtual neobanks. This diversity reflects the changing nature of the financial industry and increasing demand for digital banking solutions.

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