The U.S.-Mexico remittance corridor has long been a key market for payments companies — but competition is heating up, and it's no longer enough to simply move money from one country to another.
This month, U.S. Treasury Secretary Janet Yellen and Mexico's Finance Minister Rogelio Ramirez de la O signed a memorandum of intent to collaborate on financial initiatives, including exploring ways to integrate the two countries' payment systems to improve consumers' cross-border payment options, according to
More than 50% of adults in Mexico still lack a bank account, according to the
Mexico is also ripe for digital payments development, as the second-highest receiver of remittances in the world, trailing India, according to a recent report from the
Some fintechs are deepening their payments technology investments in Mexico to reach more consumers and merchants there. One is
Founded in 2014 in the outskirts of Mexico City, MexPago's integrated payment platform enables merchants to make and receive all types of payments in Mexico. The deal, announced in October, requires approval from local regulators, but Airwallex hopes it will close next year. Terms were not disclosed.
Buying MexPago will bring Airwallex access to one of Mexico's coveted Institution of Electronic Payment Funds (IFPE) licenses that enables the capture of consumer deposits, with the deal providing a shortcut to a painstaking and time-consuming application process. MexPago will also give Airwallex access to Mexico's Interbank Electronic Payment System (SPEI), the instant-transfer payment service operated by the central bank that's used primarily by consumers for recurring payments. In 2019, Mexico also launched Cobro Digital (CoDi), a request-to-pay function that supports QR codes and Near Field Communication (NFC) payments and is supported by 38 local banks.
"Buying MexPago, with its existing license, saved us two years," said Ravi Adusumilli, executive general manager, for the Americas, at Airwallex.
This expansion builds on similar cross-border payment partnerships Airwallex has been building in quick succession around the world. Beginning in Melbourne, Australia, in 2015 when two entrepreneurs who had invested in a coffee shop found existing cross-border payment options to be costly and time-consuming, Airwallex rapidly evolved from serving small businesses to working with large global enterprises.
This year, Airwallex added American Express to its payments gateway, adding more choices for companies using the Airwallex platform. Shopify has integrated with Airwallex so merchants on that marketplace can accept cards or use Apple Pay or Google Pay or local payment methods in many countries.
Brex is using Airwallex to facilitate repayments for global corporate cards used for business expenses; Papaya Global's global payroll solution is powered by Airwallex and Chinese fast-fashion giant Shein uses Airwallex to collect payments from consumers in multiple currencies, and to send payments to sellers.
"When you look at everything we do with our infrastructure and our licenses, and different solutions we offer, we have a lot of overlap with different companies like
Using the acquisition path to gain rapid access to Mexico, where many digital remittance providers already have a strong foothold, makes sense for Airwallex, said Martin Koderisch, a principal with Edgar, Dunn & Co.
London-based
Paysend, another U.K.-based fintech, recently said
Despite remittance-providers jockeying for market share in Mexico, there is still plenty of room for growth there, said Martin Koderisch, a principal at Edgar, Dunn & Co.
"I see the acquisition of MexPago more of a market entry strategy than necessarily a sign of consolidation," he said, noting that Airwallex's move aligns with a trend among fintechs that are buying firms to bring more capabilities under one roof.
Enterprises expanding globally increasingly are seeking providers that can support them end-to-end and provide seamless interconnected processes and data visibility, Koderisch said.
Airwallex in recent years has formed more than 60 banking partnerships around the world, including money-movement licenses and regulatory permits wherever needed to globally support its virtual bank accounts, which it serves through proprietary software, according to Adusumilli.
"For the first few years, our strength was cross-border payments with better foreign exchange rates, then we realized our customers with global operations moving money needed a place to store funds, so we started creating virtual bank accounts, and then payment acceptance and then issuing, so it all got added because we wanted to be a one-stop payments platform and operating system for SMEs," he said.
Adusumilli sees significant room for banks and fintechs to expand cross-border payments capabilities and serve more local businesses with broader commercial services.
"There are a lot of financial services companies working on cross-border payments and related services, but I think it's still the least disrupted industry and there is still a lot of room for innovation for fintechs working together with banks," he said.
Airwallex has 1,400 employees and supports payouts in more than 150 countries, with 90 of those using less costly local payment rails, and enables thousands of merchants to accept payments through major card networks in more than 180 countries. Airwallex also issues virtual cards in more than 37 markets.
