CoDi, A Retail Payments Platform, An Alternative to CashMoney in physical form such as banknotes and coins. More?

In 2019, Mexico’s central bank launched Cobro Digital (CoDi, Digital Charging), a real-time mobile payments platform enabling users to make transfers through QR codes and near-field communication (NFC) technology.

Built on top of the Sistema de Pagos Electrónicos Interbancarios (SPEI, Interbanking Electronic Payments System), CoDi requires both payee and payer to have a bank account and a mobile phone with an internet connection. In March 2019, Reuters reported that retail platforms Amazon and Mercado Libre reached out to Banco de México to help develop the solution. According to Jaime Cortina, the central bank’s director of operations and payments, Amazon and Mercado Libre “said that they could implement it relatively quickly,” in a telling sign of how big tech aims to develop retail paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More solutions to reduce the use of cash.

Banco de México’s developed the payments solution to provide banks, retailers, and end-users with an efficient, frictionless, and low-cost alternative to other means of payment, including cash. With CoDi, “every Mexican can send and receive electronic payments regardless of their economic background or any other conditions,” according to Miguel Díaz, general director of payment systems and market infrastructures at Banco de México. The central bank also welcomes fintech firms, moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More issuers, and crowd funders to adopt CoDi, “so long as they comply with the rules and regulations,” according to Díaz.

Is CoDi > Cash? No, Cash > CoDi

Díaz expected that Mexicans would use CoDi more with the Covid-19 pandemic, as it would help “people to maintain social distance, a safety measure [and habit] that will last long [after the pandemic], which will accelerate [CoDi’s] use.”

• CoDi went from 1,747 transactions when it was launched on September 30, 2019, to a maximum of 22,718 transactions on January 28, 2021. On June 7, 2021, CoDi processed 4,264 transactions (see Graph 1).
• As of June 9, 2021, CoDi had validated 9.31 million accounts: 61% of CoDi users had accounts at BBVA’s subsidiary in Mexico, followed by Bancoppel (16%) and Citibanamex (12%). As of that same day, at least 551,281 CoDi accounts had made at least one payment, and 482,236 accounts had received at least one payment. 
• CoDi users have transferred a total of MX$1.9328 billion (or US$97.95 million) from its launch to June 9, 2021. The average transaction value in the same period was MX$793 (US$40.28).

Graph 1. Mexico: CoDi Transactions, September 30, 2019-June 7, 2021

Source: Banco de México.

Mexicans have not adopted CoDi widely in retail payments. Cash in the hands of the Mexican public went from MX$1.67 trillion (US$84 billion) on March 11, 2020, the day when the WHO declared Covid-19 a pandemic, to MX$2.18 trillion (US$110 billion) on March 31, 2021. On March 11, 2020, CoDi users realized 2,849 transactions with a value of MX$1.704 million (US$86,549); On March 31, 2021, CoDi processed 8,804 transactions valued at MX$8.32 million (US$422,931).

Despite the rapid and bigger increases in CoDi transactions (209.02%) and value (388.65%) compared to the growth in cash held by the public (30.33%), we would be mistaken to think that Mexicans have widely adopted the mobile platform in their daily transactions. Rather, and despite its rapid growth, CoDi has barely made a dent in Mexican retail payments, where cash is still dominant.

According to a December 2020 survey conducted by Banco de México, most Mexicans still choose cash as their preferred means of payment. Moreover, no respondents to the survey used CoDi regularly before the Covid-19 pandemic; now, 0.9% of the target population (barely 700 thousand people out of 66.9 million Mexicans) said they are using CoDi to make payments.

Limits to Mobile Payment Platforms in the Country of Financial Exclusion

CoDi is Banco de México’s main initiative in the country’s 2019-2024 financial inclusion policy (Gobierno de México 2020: 87). However, Mexicans do not demand mobile payment services in general or CoDi payments in particular (Fundef 2020: 36-37). Several factors constrain the demand for mobile payments:

• Mexico has low levels of financial inclusion: in 2018, 31.7% of all Mexican adults (25.05 million adults) were unbanked or financially excluded, meaning that they had no banking product whatsoever, and 23.5% of all adults in the country (18.61 million adults) were financially included but underbanked, as they had only one financial product (INEGI, CNBV 2019: 9).
• According to the 2020 census, most (but not all) Mexican households (87.5%) reported having a mobile phone.

Mexicans Hesitate about Using Alternatives to Cash Given Fraud Risks and Other Problems

Mexicans might not be using cash alternatives as they are afraid of fraud risks and other problems. The country’s 2018 National Survey on Financial InclusionA process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. While it is recognised that not all individuals need or want financial services, the goal of financial inclusion is to remove all barriers, both supply side and demand side. Supply side barriers stem from financial institutions themselves. They often indicate poor financial infrastructure, and include lack of ne... More reported several respondents had issues with financial products, services, and schemes: 7.3% (representing 5.8 million Mexican adults) said they had experienced identity theft, card cloning, and outright frauds. (INEGI, CNBV 2019: 205).

According to the National Banking and Securities Commission (CNBV), Mexican cardholders cancelled 1.13 million credit cards between March 2020 and March 2021. As in the United Kingdom and other countries, the number of cardholders’ claims about frauds has increased since the Covid-19 pandemic started, according to Oscar Rosado Jiménez, head of the National Commission for the Protection and Defense of Financial Services Users (Condusef). The most frequent claims correspond to unrecognized charges and unauthorized ATM withdrawals.

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