The highly profitable Mexican credit card market has
grown rapidly over the past several years, and future competition
looks set to be particularly fierce among issuers that are vying
for new consumers at Mexico’s tills, whether bank issuer or
Sarah Williams

While cash remains the dominant payment mechanism in Mexico, over
the past three years, its largest commercial banks have launched
aggressive campaigns aimed at increasing uptake and use of credit
cards, in particular, driven by the high levels of profitability
deriving from high interest and interchange rates. Retailer
issuers, too, are jockeying for a piece of the credit action.
Remittances, prepaid applications and technology innovation are
also contributing to an increasing card culture among Mexican

Debit cards, ATMs and POS terminals

As of the end of 2006, there were 35.9 million debit cards in use,
in a country with a population of around 108.7 million inhabitants.
(See Figure 1.) Growth in the number of cards has been gradual over
the past several years, with the numbers growing at a CAGR of 2.5
percent between 2002 and 2006. Mexicans are using their cards more
frequently, as the number of transactions grew by 7.2 percent in
2006 compared to the previous year. This is due to several factors,
not least the growth in opportunities for Mexicans to use their
cards. For example, the number of ATMs grew by an average annual
rate of 10.8 percent between 2002 and 2006, while the number of POS
terminals has risen by close to 22 percent a year since 2002. (See
Figure 2.)

Major Mexican bank Banamex, a subsidiary of Citi, provides a good
example of the changes that are happening in the financial sector –
over 2007 it is rolling out automatic banking kiosks. These kiosks
offer 24-hour card-based access to services such as cash deposits
and payment of credit cards and utility bills. Another trend is the
introduction of surcharging ATMs by companies such as Cardtronics,
which has begun expanding its operations beyond its domestic US

According to a 2007 survey by US e-commerce processor CyberSource,
60 percent of Mexican bankcards cannot be used for cross-border
transactions due to strict currency controls.



 Credit cards

The number of credit cards held by Mexicans has been growing at a
very rapid pace. (See Figure 3.) The number of such cards in use
has grown from 7.8 million at the end of 2002 to almost 18.1
million cards by the end of June 2007.

The average credit card transaction value has grown steadily over
the past few years to reach MXN838 ($76) as of the second quarter
of 2007. Spending levels have grown rapidly this decade: over the
period 2002 to 2006, the value of credit card spending rose by an
annual average rate of 22.8 percent. (Within this, POS card
transaction volumes for Visa in particular rose by 34 percent to
$18.8 billion over the 12-month period ending end-September


 A number of key factors has prompted this rapid rise, both in
the number of cards and in use levels. One reason is that over the
past five years, banks have actively promoted the use of credit
cards, leading to much higher card numbers as well as levels of
indebtedness. (As recently as mid-2005, it was estimated that 86
percent of transactions were made with cash, providing ample
opportunities for increased card use.) Some banks, including
Bancomer, chose to aim credit cards at lower- or middle-income
consumers who traditionally had not used credit cards. These groups
were also targeted by large retailers such as Tiendas Coppel, which
offers store cards to clients who traditionally have not had access
to credit or, in some cases, even a bank account (see below).

Another reason why issuers have been keen to promote credit cards
is that, as outlined in the section below, it is a highly
profitable business in Mexico. In addition, there have been a
number of government and industry initiatives to improve Mexicans’
understanding of financial products. Typical is that of Visa’s
Finanzas Practicas, its consumer finance educational programme in
Mexico, introduced in 2005 and relaunched in 2007.


 The growing role of prepaid cards

Prepaid payroll cards have become very popular in Mexico, in large
part due to a government programme designed to encourage companies
to issue payroll cards in order to reduce the number of employers
paying staff with cash. Payroll cardholders are typically unbanked
and are not used to making card payments. To encourage them to use
payroll cards at the POS, rather than just get cash from ATMs,
banks have been putting terminals in convenience stores. This is
one of the reasons why the number of POS terminals has risen so
dramatically in recent years.

In November 2006, McDonald’s Mexico, Banamex and MasterCard
launched MasterCard’s contactless PayPass technology, marking the
implementation of the initial stage of the payment system in
McDonald’s restaurants in the city of Monterrey.

Visa is trying to increase the use of prepaid cards by government
departments and, to this end, held a seminar in September 2007 on
how prepaid cards can help public sector bodies save costs.
According to a Visa survey of Mexican government departments, there
is a high level of ignorance in the public sector about how
government-issued prepaid cards can be used to replace cheque


As indicated above, the high profitability of cards has proved
attractive for many issuers. For example, as of August 2007, the
average interest rate charged on credit cards issued by Mexican
banks was 31.9 percent, according to the Banco de México, the
central bank.

Moreover, until recently, interchange rates in the country were
significantly higher than in most other markets. Unlike in most
countries where interchange is set by the card associations, in
Mexico the level and structure of interchange fees are determined
by common agreement among banks and are the same for all of them.
This led to very high interchange rates and, as a consequence, the
Association of Mexican Banks (Asociación de Bancos de México, ABM),
urged by the Banco de México, encouraged the country’s commercial
banks to periodically review both the level of interchange fees and
the methodology employed to determine them. The ABM established a
mechanism for determining these rates based on business type and
actively encouraged rates to be lowered.

As a result, between August 2004 and December 2006, weighted
interchange fees for credit and debit cards declined 24 percent and
59 percent, respectively. Average interchange fees declined from
2.42 percent to 1.84 percent for credit cards, and from 1.92
percent to 0.78 percent for debit cards over this period, bringing
them closer in line with other countries. The weighted average for
debit cards includes an MXN13.50 ceiling established for
interchange fees. (See Figure 4.)


 The move to EMV

Mexico’s deadline for EMV compliance is early 2008. As of May 2007,
around 70 percent of all Mexican credit cards and 15 percent of
debit cards had been migrated to EMV, according to Pedro Francisco
Zago Berra, development and innovation director at BBVA Bancomer.
In addition, 70 percent of POS terminals in the Unicaja network had
been migrated to EMV, while the ECR Interredes POS network is in
the process of upgrading to EMV.

In Mexico, as in many other Latin American markets, value-added
functions are being added to the new chip-based cards. These
include rewards and promotions for bank products at the point of
sale. For example, in April 2005 BBVA Bancomer launched the Vida
Bancomer programme. The data that tracks consumer spending is then
available to merchants, and merchants can therefore know how
frequently a customer shops at their store and how much they spend.
Merchants in the scheme have the option to give cardholders
customised rewards based on spending patterns. POS terminals linked
to the programme have a separate card-accepting device that will
instantly tell customers the points status of their loyalty

Other smart card applications are being considered. In July 2007,
smart card manufacturer Gemalto delivered Mexico’s first smart card
driving licence to the city of Monterrey in Nuevo León state. It
will be supplying another 900,000 driving licences over the next
three years.

Another use of EMV technology is the Tu Salud programme, which has
become an integral part of the government’s health insurance
programme. Mexicans are being issued with EMV-compliant smart cards
that contain their prescription records. The government estimates
that by 2010, 56 million such cards will be in circulation. (In the
ten months following launch in June 2006, roughly 4 million cards
were issued.) When a Tu Salud cardholder visits the doctor, the
doctor can put the customer’s prescription on the smart card. The
patient can then take the card to the pharmacy and the pharmacist
can use the EMV-compliant POS terminal to access the customer’s
medical prescription data, provided the customer supplies the PIN
that protects the confidentiality of the data.

The role of retailers

Retailers play a very important role in the Mexican credit card
market. Indeed, some of the largest issuers include the financial
arms of retailing groups. Retailers have a natural advantage as
they have face-to-face contact with customers who might not
otherwise apply for a credit card.

Moreover, retailers are generally not as stringent as the banks,
which often require that applicants have at least a monthly minimum
wage to obtain a card. They typically target the unbanked or
under-banked. Retailer-issued credit cards typically carry a
significantly higher interest rate than those offered by

The first Mexican retailer to enter the financial services arena
was Elektra, which started Banco Azteca in 2002. There are many
examples of retailers entering the financial services market
offering cards as well as other products and services:

• Banco Amigo has a co-branded card with Mexico’s Merca, Premier
and Sé Tu retail chains;

• US consumers can now send funds from Western Union’s Vigo and
Orlandi Valuta agent locations in the US to 215 Soriana and Mercado
Soriana stores in Mexico. Recipients in Mexico pick up their money
transfers on loyalty cards issued by Soriana. The cards can be used
at all Soriana outlets for purchases or can be exchanged for cash
at the POS;

• in August 2007, Banamex announced that it was teaming up with
Organización Soriana to launch a new financial institution that
offers banking services at the Mexican self-service retail chain’s
240 stores. The aim is to directly compete with the Wal-Mart entry
(see below). The retailer expects to turn a profit 14 to 18 months
after the launch of financial services operations;

• Wal-Mart Mexico has launched a financial services operation
targeting the 44 million medium- and low-income unbanked Mexicans
who earn between MXN2,000 and MXN8,000 per year and have
historically been excluded from financial services. The first bank
branch was opened in August 2007 under the trade name Wal-Mart de
México Adelante. Wal-Mart de México expects to roll out 85 branches
by the end of 2008, which would put financial services in one of
every ten Wal-Mart locations in Mexico;

• Banco Fácil is a joint venture between US-based Sherman Financial
Group and Mexican retailer Grupo Comercial Chedraui. It is starting
to offer banking services, including credit cards, in Chedraui’s 94
stores and external locations;

• eca$hier Systems, a US financial kiosk manufacturer, has signed
an agreement with Consejo Empresarial Gasolinero Valle de México
(CEGA) to deploy its self-service kiosks in Mexico. CEGA is the
trade association for dealers and distributors for Mexican oil
company Pemex. eca$hier says that it will initially install 100
kiosks in selected Pemex stores, followed by 2,500 kiosks in other
Pemex stores across Mexico. The kiosks enable customers to make
money transfers, to make ATM cash withdrawals and to reload prepaid
fuel cards. They also issue and dispense prepaid debit cards.
eca$hier did not name the bank issuing the prepaid card;

• large furniture and appliance retailer Grupo Famsa has 333 stores
and recently launched a banking unit called Banco Ahorro Famsa,
which offers credit cards; and

• other Mexican retailers involved in credit cards include Palacio
de Hierro and Puerto de Liverpool.

The role of remittances

Remittances play a large role in the country’s economy as such a
large number of Mexicans work abroad, notably in the US. In 2006
alone, Mexicans living in the US sent $23.1 billion back home. The
form of these remittances is changing and the Banco de México has
estimated that electronic transfers accounted for 93 percent of
total money remittances from the US to Mexico in 2006, up from 53
percent in 1996 and 85.8 percent in 2003.

This flow of funds has created numerous opportunities for
electronic and card-based transfer systems, especially as the
number of ATMs in Mexico has being growing rapidly. For example,
Tio Networks, a North American financial services kiosk network
operator, is about to start offering Nexxo Financial’s money
remittance services at its kiosks and ATMs in the US. By early
spring 2008, customers will be able to send funds to relatives
outside the US at Tio kiosks and ATMs located in US convenience
stores. Recipients will be able to pick up the funds at Nexxo agent
locations in Mexico and other Latin America countries.

More and more players, both within and outside Mexico, are
attempting to win a greater share of this huge market. In July
2007, for example, Wells Fargo launched the ExpressSend money
remittance service, which offers free or low-cost international
fund transfers to Mexico. Customers can choose to have money sent
from their Wells Fargo account either to a recipient’s bank account
or to a bank branch if they are unbanked. Recipients are able to
withdraw the funds at ATMs if they have an ATM card.

Similarly, the US stored-value company TeleNet Services
International has signed an agreement with a domestic bank whereby
its prepaid Discover debit cards allow the US cardholder to
transfer funds from the card to any bank account in Mexico. These
initiatives are important to the card market as they are increasing
Mexicans’ level of acceptance of card-based payment systems.

As a recent report from US financial consultancy Aite Group noted:
“Using prepaid cards for remittances will take a while to become
widespread… what will likely help is the fact that Hispanic
consumers in the US are increasingly using prepaid cards for their
own personal spending. Using prepaid cards to initiate money
transfers on the web or the phone is an obvious next step for

Remittances to Mexico from the US are, unsurprisingly, dependent on
the strength of the US economy. As the US economy has begun to
falter, the percentage of Mexicans living in the US who regularly
send remittances home fell to 64 percent in the first six months of
2007, down from 71 percent in the same period last year, according
to the Inter-American Development Bank. One of the reasons that
such transfers are down is that as many as one in four Mexican
workers in the US is employed in the construction industry, which
makes them particularly susceptible to the recent bursting of the
US housing bubble.

Technology innovations

Players in the Mexican cards market continue to invest in new
technologies, such as wireless POS terminals and contactless cards.
Examples include:

• fears about card-skimming at restaurants have led to growing
demand for wireless POS terminals. VeriFone already has 20,000
portable pay-at-table terminals deployed in the country and has
been equipping Mexico City taxi cabs with card readers;

• as of early 2007, Banamex has been working with MasterCard to
introduce cards with the PayPass contactless technology at
McDonald’s locations across the country, starting with a pilot
project in Monterrey; and

• in July 2007, BBVA announced that it was planning to launch a
trial of wireless technology that will enable Latin American
retailers to accept card payments using a mobile phone instead of a
traditional POS card reader, making it cheaper for merchants to
accept cards.

Competitive landscape

The past decade has seen a number of major mergers and acquisitions
within the Mexican banking industry. Banamex was acquired by
Citibank; Bancomer was acquired by Spain’s BBVA and is now known as
BBVA Bancomer; Serfin was acquired by Santander, another Spanish
bank, and is now known as Santander Serfin; Bital was acquired by
HSBC and is now HSBC Mexico; and Inverlat was bought by Scotiabank
and is now known as Scotiabank Inverlat.

Over the past five years, Mexican banks have been aggressively
extending credit, which accounts for the rapid increase in both
cards in use and transaction volumes over this period. 



Banamex is Citigroup’s Mexican subsidiary. As of May 2007, Banamex
was issuing both Visa and MasterCard EMV chip cards using the same
smart card platform. In addition to partnerships with Mexican
retailers, Banamex has launched a number of products to attract and
keep credit card customers.

For example, the bank has introduced La Verde (Green), a credit
card targeted at supporters of Mexico’s national football team. La
Verde offers cardholders the chance to win free trips to the 2010
football World Cup and the 2009 Copa de Oro. Banamex is also the
main sponsor of Mexico’s national football team until the end of
2010, with an option for renewal beyond 2010.

In June 2007, Banamex launched a co-branded credit card in Mexico
with Spanish football club FC Barcelona.

HSBC Mexico

HSBC Mexico says that its credit cardholders’ total balances
outstanding rose by 108.4 percent to MXN7.39 billion in the year to
31 December 2006. At the end of 2006, HSBC had a 7.2 percent market
share of Mexico’s total credit card balances outstanding,
representing a 2.3 percent increase on the previous year. Overall,
HSBC Mexico had 1.7 million credit cards in issue at the end of
2006, up 76 percent from 2005.

As of the end of 2006, the bank’s Tu Cuenta packaged account had 1
million account holders. Tu Cuenta features a credit card offering
5 percent cashback, along with a current account, debit card and
savings account.

Grupo Scotiabank

Grupo Scotiabank is the Mexican subsidiary of Canadian banking
group Scotiabank. For the nine months to 30 September 2007, credit
card sales totalled MXN539 million, up from MXN467 million a year
earlier. Credit card lending was up by 31 percent – or MXN1 billion
– year-on-year in the first nine months of 2007. Grupo Scotiabank
says its personal lending book, including credit cards, rose by
MXN836 million, or 5 percent, year-on-year to MXN18.57 billion in
the second quarter of 2007.

Credit quality remained stable over the period, but there was a
slight increase in delinquency in Grupo Scotiabank’s credit card
portfolio. In May 2007, it launched the Scotiabank Fiesta Rewards
Platinum credit card, targeted at its most affluent customer

BBVA Bancomer

BBVA Bancomer’s revenues from credit and debit card sales and fees
rose by 19.1 percent year-on-year to MXN3.98 billion in the first
half of 2007. This growth, says the bank, was due to the volume of
transactions rather than to an increase in its prices. The bank has
decided to expand its credit and debit card acquiring, and as such
bought 21,300 Hypercom countertop and mobile POS terminals over the
course of 2007.

In June 2007, parent company BBVA set out its expansion plans for
its Mexican operations. BBVA wants to add 45 new branches in Mexico
by 2010, and increase the number of its ATMs from 4,876 to 7,500.
Bancomer has a deal with Xoom, a US-based online money transfer
service, whereby consumers make international money transfers using
credit or debit cards, PayPal or bank accounts.