Retail giant Walmart has announced its plans to tap into Mexico's fintech market with the launch of its Cashi digital wallet. However, experts suggest that this move may come with potential risks due to the proliferation of risky clients in the untapped market.
Despite the challenges, executives at Walmart's financial services unit are optimistic about the potential of the Cashi wallet, which is expected to offer a range of services, including transfers, withdrawals, and remittances.
Marcelino Herrera, Senior Vice President of Financial Services at Walmart's Mexican unit, Walmex, stated that the company aims to be the leading financial services application in Mexico, which requires constant investment.
Walmart will invest $15 billion in automation and alternative revenue streams in 2023, including its advertising business, third-party marketplace, and deliveries.
Walmart has been exploring various avenues to expand its financial services globally. Last year, the retail giant unveiled plans to offer digital bank accounts and other financial services to its 1.7 million U.S. employees and shoppers through its majority-owned fintech venture, One.
The company plans to expand its offerings to include loans and investment products. Despite the potential for significant growth in the Mexican fintech market, Walmart faces challenges due to the country's high number of risky clients. According to data from Mexico's financial regulator, over half of the country's adult population does not have a bank account.
Additionally, Mexico has one of the highest rates of fraud in the world, making it challenging to develop trust in financial technology services. This scenario means that Walmart must tread cautiously and implement stringent measures to ensure the safety of its customers' funds.
Walmart's move into Mexico's fintech market comes at a time when the country's government is increasing its efforts to regulate the industry. Mexico's central bank has recently introduced new regulations for fintech companies that offer electronic payments and crowdfunding platforms, and it has also been developing a digital peso to promote financial inclusion.
Walmart's entry into Mexico's fintech market comes with risks, but the retail giant's reputation and financial muscle can provide it with a competitive advantage. As the company invests in Cashi and expands its financial services, it will be essential to implement robust measures to prevent fraud and protect customer funds.
If successful, Walmart could become a major player in Mexico's growing fintech market and make significant inroads in its quest for alternate revenue streams.