UK neobank Revolut gets Mexico banking license

Revolut, the British-born unicorn, with a whopping 40 million clients globally across 50 countries and a prized banking license for the European Economic Area, has just clinched approval from Mexico’s banking regulator to officially become a bank in the country.

Joining the ranks of digital neobanks, Revolut’s endeavor comes amid a wave of expansion among online lenders in the country and increasing competition. Now, it will have to comply with certain requirements in order to officially launch operations soon.

Founded in 2015 in Great Britain but now serving multiple countries across Europe, Revolut aims to carve out a space in the increasingly crowded Mexican market with its flagship product: low-cost international transfers.

A strategic decision from Revolut bears fruit

The decision follows another strategic decision in the region. The digital lender has also set up shop in Brazil, too, as the digital banking market is getting increasingly competitive in Latin America. Many neobanks in the country have already amassed significant market share, challenging the long-standing domain of traditional banks.

In Mexico, however, the market is far less mature, with remittances playing a much larger role in its economy compared to Brazil. This license will enable Revolut to provide a broad spectrum of financial products and services to Mexican users,” the company stated, and it is gearing up for the audit process to be conducted by the authorities, a crucial step preceding the commencement of operations in the market.

Revolut has been striving for approval in Mexico since 2021, when it brought on board former RappiPay executive Juan Miguel Guerra to spearhead its market entry. The thriving Latin American market attracted numerous foreign institutions in recent years, but not all endeavors were successful.

Just last year, German lender N26 announced its withdrawal from Brazil. Despite aiming to introduce its global account offering to serve Brazilians traveling abroad, it struggled to gain significant traction. This was especially evident as other digital lenders, led by Nubank, dominated a sizable market share and presented strong barriers to new entrants.

Revolut and other foreign fintechs in Mexico

Mexico’s fintech ecosystem is undeniably robust, boasting nearly 1,000 companies, including 217 foreign entities from over 22 nations. Over the last five years, the domestic sector has exhibited a remarkable compound annual growth rate of 18.4%. This growth is further fueled by the influx of non-Mexican firms, eager to tap into a market of 130 million potential consumers.

The fintech sector in Mexico has been a magnet for international players, particularly those from its northern neighbor. Fintechs from the United States dominate among foreign entrants, claiming a significant 25.8% share of international startups. Chilean firms follow closely behind at 20.3%, with Colombia and Argentina occupying the third and fourth positions with shares of 16.1% and 13.4%, respectively.

Also recently, Spanish giant Santander announced that it will bring its European digital bank, Openbank, to the U.S. and Mexico with an anticipated launch in the second half of this year. The remittance market has also drawn the attention of Nubank, a major competitor.

Money flows from the U.S. play a huge role in Mexico’s economy, contributing approximately 4% to its GDP. Mexican nationals residing in the U.S. sent a staggering $63.2 billion in remittances last year.