Citi's Mexico unit takes first steps toward open banking

To reach new consumers and businesses for savings and lending, Citibanamex isn't just building new products — it's building application programming interfaces, or APIs.

This plan is also crucial for keeping existing customers who might move their accounts to a fintech. Rather than compete against those companies, Citigroup's Mexico subsidiary (the 137-year-old Banamex, which Citi bought in 2001) is developing open banking APIs internally.

Citibanamex has created an API Hub where fintechs can access its first open banking API, providing real-time information on the locations of its 9,000 ATMs and the services they provide. It's a small start, but it's attracted a few partners already.

“There have been tens of applicants for our first API; we knew the number of applicants wouldn’t be in the hundreds or thousands," said Esteban Dominguez, Citibanamex’s director of fintech partnerships and open banking. “Our in-house tech team will have to keep on growing as there are opportunities for Citibanamex to collaborate with fintechs in Mexico.”

Mexico’s open banking regulations have sparked a boom in the country’s fintech industry. Mexican banks had to comply with the first phase of the open banking regulations by June 2021 by sharing APIs with third parties and providing access through their APIs to publicly-available data such as ATM locations.

Bloomberg

One plan is to embed third-party products in Citibanamex banking channels via open banking. Another is to to embed Citibanamex products into channels provided by fintechs, according to Dominguez.

The financial regulator Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission) will publish the second phase of Mexico’s open banking regulations by the end of 2021, covering the sharing, on a permissioned basis, of transactional data from customers’ bank accounts, loans and other financial products.

Under Mexico’s open banking regulations, which will take several years to be fully implemented, all Mexico’s financial services companies including banks, fintechs, money transfer services and credit bureaus will have to provide open banking APIs to share data with each other.

“Mexico’s approach to open banking is one of the farthest-reaching globally,” said Francesco Burelli, a consulting partner at advisory firm Arkwright. “Open banking data providers will be allowed to charge fees for their data provided that their pricing doesn’t prevent accessibility and innovation.”

Open banking also has the potential to increase financial inclusion in Mexico.

“Only 40% of the population has a bank account, and the number of people with more than one banking product, for example savings or loan accounts, is even lower,” Dominguez said. “So there is an opportunity to bancarize more people and to target those who do have a bank account but don’t have a wider relationship with their bank.”

With the growth of e-commerce in Mexico and the high number of Mexicans without credit cards, Dominguez also sees an opportunity for Citibanamex to offer buy now/pay later products as well.

Dominguez said it is too early to provide details of Citibanamex’s new savings and lending products or partners. But Citibanamex could follow an approach it took in Southeast Asia, where Citi has launched a credit card with ride-hailing and digital wallet provider Grab.

One category of fintech Citibanamex wants to partner with is open banking API aggregators who connect bank APIs to fintechs.

“Establishing one-to-one API connections between fintechs and banks would take a lot of time, so having an aggregator in the middle giving us a single connection to all the fintechs will help us gain speed,” Dominguez said. “I see a lot of value in partnering with technology aggregators, but it’s still early days, as aggregators are nascent in Mexico.”

Pablo Viguera, co-CEO of the Latin American open banking API aggregator Belvo, said his firm is constantly looking for ways to collaborate with different players in Mexico including fintechs and established FIs. “We’re already working in some capacity with most of the Mexican banks and our Mexican partners are using our infrastructure to build innovative solutions leveraging financial data through APIs,” he said.

One Mexican bank has already launched an open banking partnership with a big tech. In 2019, the Mexican subsidiary of the Spanish bank BBVA partnered with Uber to enable the firm’s unbanked drivers and delivery partners to open a digital bank account within its app by using BBVA’s open banking API.