Officials say Mexico’s credit card monopoly hurts cross-border trade


Officials say Mexico’s credit card monopoly hurts cross-border trade

Mexico discriminates against U.S. bank card providers and local fintech firms in favor of state-owned companies, industry experts say.

“Mexico does not have market access for payment processing,” Brian Pomper, executive director of the Washington-based Alliance for Trade Enforcement, told FreightWaves.

The Alliance is a coalition of trade associations and business groups that help foreign governments stop unfair trade practices.

Pomper, along with other critics of Mexico’s fintech sector, have urged Mexican authorities to end the monopoly of the country’s credit card payments industry that favors the country’s biggest banks, tying up trade, innovation and startups.

For decades, Mexico’s major banks controlled the country’s two clearinghouses for all credit card transactions, E-Global and Prasa. Together, e-Global and Prosa process approximately 7 billion credit card transactions each year in Mexico.

“Visa and MasterCard do business in Mexico, but they’re blocked by Prosa and e-Global,” Pomper said. “American companies believe they have much more to offer than what is currently allowed by the restrictions that allow them to operate.”

Julio Madrazo, founding partner of Mexico City-based de la Calle, Madrazo, Mancera (CMM), says the monopoly on the credit card processing system hurts foreign investment in Mexico in the long run. CMM is a consulting firm specializing in economics, regulatory processes and international trade.

“While Mexico currently has very efficient cross-border trade, increasing competition in the payment system to aggressively invest in innovation, technology and more options regarding clearinghouses, clearinghouses, in because of competition, would no doubt be beneficial. Provide more competitive service,” Madrazzo told FreightWaves.

The FinTech Mexico Association, a group of Mexican fintech companies, recently sponsored a report published by CMM that concluded that e-Global and Prosa function as a network, operating exclusively.

Fintech Mexico’s study echoes a 2020 report by the country’s Federal Competition Commission (COFECE) that found E-Global and Procer’s monopoly on credit card payment processing hinders economic growth and small businesses nationwide.

“COFECE made it clear in its 2020 survey, among other aspects, that there are no conditions of competition in card payment networks,” said Ernesto Calero, general manager of the Fintech Mexico Association, at FreightWaves. “The direct consequence of this is a substantial gap in the adoption of new technologies that will help provide innovative, low-cost solutions to increase financial inclusion.”

The Mexican credit card payments industry started with E-Global and Prasa

Credit card clearinghouses are networks that verify and finalize transactions between buyers and sellers in a marketplace, and provide data security wherever a card is used.

According to, the global credit card payments market was valued at $478 billion in 2021. The market is estimated to reach a value of $762 billion by 2027.

According to a Nielsen report, global credit card transactions totaled 581 billion in 2021, up 24.5% year-over-year. The Mexican credit card and payments market will total $149 billion in 2021.

The largest global players in the credit card clearing house industry are MasterCard, Visa, American Express, Bank of America, Barclays, Capital One, Citigroup and JPMorgan Chase & Co.

The two clearinghouses operating in Mexico – E-Global and Prosa – are owned by the largest banks in the country. Each of these banks and financial institutions offer credit and debit card transactions in most of the country.

E-Global, which began operations in 1998, is owned by BBVA Bancomer and Citibanamex. Prosa was founded in 1968 and is owned by HSBC Mexico, Santander Mexico, Scotiabank, Banorte, Invex and Banjercito. E-Global handles approximately 2.6 billion transactions per year. Prosa processes 4.7 billion transactions per year, representing more than 60% of the Mexican market.

MasterCard gained operational authority in Mexico in 2019, while Visa received approval from the country’s central bank to act as a clearinghouse in 2020. However, Visa Mexico and MasterCard Mexico have yet to be launched as payment clearinghouses in the country.

Calero said that although Visa and MasterCard have been authorized to operate in Mexico, they have not yet been structured to provide home network processing services.

“Prosa and e-Global, as well as issuers and acquirers who are members of the Mexican Association of Banks [i.e. the banks that own both clearinghouses] may decide on any changes to the agreement that governs the terms of participation in the payment network,” Calero said. “In other words, any modification of the internal exchange agreement is determined by these participants, to the exclusion of the other [such as Mastercard, Visa or issuers, acquirers, and aggregators that are not members of the Association of Mexican Banks] able to give their opinion on the matter.

E-Global, Prasa, Visa and MasterCard did not respond to FreightWaves’ requests for comment.

Madrazo says that because E-Global and Prasa are so big in Mexico, it’s also impossible for new financial institutions — whether traditional banks or fintechs — to enter the country’s market to choose a clearing house completely independent of one or the other.

“In addition, banks owned by Prosa and e-Global benefit from cost centralization [given their ownership of both clearing houses]What is an advantage compared to other banks [usually, smaller] And other fintechs don’t appreciate that,” Madrazo said.

Another advantage that E-Global and Prosa offer its owners is to give banks access to information that other financial institutions or startups do not have, giving them a competitive edge.

According to the COFECE 2020 report, “the co-ownership of clearing house shareholder banks gives them access to information from other participants, which constitutes an unfair advantage as they can anticipate and counter the commercial strategies of their competitors”.

More clearinghouses can drive innovation and growth

The Fintech Mexico Association expects regulators to finally implement COFECE’s 2020 recommendation that the eight banks that own E-Global and Prosa should relinquish their 51% stake in the two clearinghouses.

« Fintech [Mexico] The Association strongly supports the recommendations of COFECE and believes that these measures are necessary to achieve real competition in card issuance.

art,” Calero said. “Furthermore, domestic foreign exchange arrangements should be governed and enforced by a non-bank entity, and banks that hold dominant positions in both issuance and acquisition should be forced to divest one aspect of their activity. [issuing or acquiring]”

Calero said that if Visa and MasterCard and other fintech startups are able to operate at standards used in other markets, such as the United States, Mexico could see changes in its digital payments landscape. .

“Visa and MasterCard can enable the innovative technology needed to seize the huge market opportunity that cash payments represent,” Calero said. “Today, according to a Visa study, only 18% of payments are made electronically in Mexico. Compared to other Latin American markets like Brazil, Chile and Colombia, which have less than 30% electronic payment penetration, Mexico is really lagging behind.

Since the publication of the COFECE study in 2020, the Mexican government has done little to change anything. Madrazo said the government’s inaction is disheartening.

“We think it’s a combination of factors – first, antitrust enforcement is relatively new in Mexico [since the first antitrust authority was created in 1992]Madrazo said. “Secondly, COFECE is currently short of three commissioners. He’s supposed to have seven, but he’s currently only working on four.

Madrazo said that, for unclear reasons, the government had delayed sending commissioner candidates to the Mexican Senate.

“Last, but not least, it doesn’t appear that the current administration of COFECE has the will to fight Mexico’s biggest banks,” Madrazo said.

Pomper says allowing Mexico to be more included in its financial system would be good for everyone. He is optimistic that change may be on the horizon.

In July, U.S. Trade Representative Catherine Tay stressed the importance for U.S. electronic payment services companies to be able to fully participate in the Mexican market during a meeting with Mexican Economy Minister Tatiana Clothier.

“We are convinced that if you allow more companies to enter the market, it will help financial inclusion in Mexico,” Pomper said. “This will contribute to economic recovery and economic development. This will allow more businesses to use modern technology that more effectively protects against fraud and financial networks. This will increase trade and help improve North American competitiveness.

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