LatAm retail group Femsa aims to crack Mexico’s unbanked ‘puzzle’

Latin America’s largest convenience store operator Femsa is using its vast network of outlets as the springboard for an ambitious push into financial services in Mexico — where less than half the adult population has a bank account — as well as eyeing expansion in the US.

Femsa, which operates more than 20,000 stores in Mexico under the Oxxo brand, has been encouraged by the initial success of its new debit card which has attracted almost 4mn customers since its launch in 2021. The $29bn group says it wants to “democratise” financial services for the country’s 125mn inhabitants.

“Of all the countries in Latin America, the one that is still most cash-oriented is Mexico,” chief corporate officer Francisco Camacho Beltrán told the Financial Times in an interview. “That opens a lot of possibilities for our digital business in the fintech space.”

But this is a tall order in Mexico, which has lagged behind regional peers despite numerous private and public sector-led initiatives to promote financial inclusion. Less than half the adult population has a bank account, according to banking regulator CNBV.

The country’s large informal workforce and a lack of trust in banks have been cited as reasons for the slow rate of progress but it has still been called a “puzzle” by the Center for Global Development, a US think-tank.

At Oxxo, one of the country’s largest retailers, 79 per cent of transactions were still made in cash, the company said.

“The democratisation of financial services is part of our objective,” said Camacho Beltrán.

Oxxo stores are ubiquitous in many Mexican towns and cities, with customers buying drinks and snacks along with paying their bills, credit cards or other correspondent banking services. The majority of sign-ups to Spin, the group’s digital debit card, were made in stores. That figure compares with 31mn debit cards issued by retailer Coppel’s BanCoppel.

Camacho Beltrán said the group could start providing loans or insurance in the future if it gained more customers.

Monterrey-based Femsa, which traces its origins to an 1890s brewery in the city, earlier this month began selling its stake in Heineken as part of a broader strategic review. The company’s shares have risen about 8 per cent since the news after underperforming the index in the past two years, with investors welcoming a return to its core businesses of retail and Coca-Cola bottling.

The ongoing sale of Heineken shares has already provided about $3bn in extra cash, part of which will go to pay down debt.

Camacho Beltrán said he could not yet say where the rest would be invested but the group was looking at expanding in the US. The company still had to analyse its options, he said, but would look at buying an existing regional chain as well as examining how its Oxxo format might adapt to the US, where more than 70 per cent of convenience stores were tied to gas stations.

Femsa’s stake in Heineken meant it was not allowed to sell alcohol directly to consumers under US state laws. Now Femsa, based near the Texas border, is looking at expanding as a convenience store in the US.

Camacho Beltrán said Femsa had already shown that it could do business in the US through its Envoy Solutions business, a distributor of packaging and other disposable products that had bought up several smaller players. It also operates in Brazil, Colombia and Argentina.

“As we learned in South America . . . we know the name can travel, the format can travel but we made some adjustments,” he said.

In Mexico, Oxxo stores are designed for people to quickly pick up snacks and drinks with a limited offering of hot goods, while in Colombia and Brazil stores have bread baked in store, espresso-style coffee and seating.

Camacho Beltrán said that in Mexico the network of well-known stores, combined with the lower regulatory requirements of a fintech licence that made opening accounts easier, put it in a unique position.

There are more Oxxos in Mexico than branches of all commercial banks combined, according to central bank data. “We think there’s an important element in the way we want to do it, which is leveraging the physical presence of Oxxo stores,” Camacho Beltrán said.

The company also wants to sell financial services to small traditional stores, key clients of its subsidiary Coca-Cola Femsa, the world’s largest bottler of Coca-Cola.

It could offer terminal payments through its subsidiary NetPay and offer them the Spin app to take payments. Femsa was also running pilots for a new platform for small stores to manage purchases from suppliers, Camacho Beltrán said.

Mexico’s highly concentrated and profitable banking sector is changing with Citigroup’s ongoing sale of one of the country’s oldest banks, Banamex. The entry of regional start-ups such as Brazil’s Nubank, Argentina’s Ualá and Colombia’s Rappi has also increased competition for some services.

The smaller transaction size from Spin customers might not interest a traditional bank, Camacho Beltrán said. “That ecosystem of consumers, the ecosystem of needs is different and on a different scale because of the magnitude of the transaction than those a bank would look for,” he explained.

He added that applying for a licence to become a full bank was not necessarily part of the plan but that they would explore it if the kind of growth or services they wanted to offer required it.

“If we have to do it ourselves or we have to do it through a partner they are things we can always explore,” he said.

In Mexico, where the company aims to open 800 to 1,000 new Oxxo stores this year, Femsa has been trialling new formats to further segment the market, including a cashier-less store in the Tec de Monterrey university.