Sonect in Mexico: Turning Tienditas into ATMs

Payments expert Sandipan Chakraborty founded Sonect in Zurich, Switzerland, in 2016. Sonect converts retailers into “virtual ATMs.” After downloading the app, users add 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 to their Sonect wallet. When they need cashMoney in physical form such as banknotes and coins. More, they locate shops through the app, request funds, and receive a barcodeMethod for encoding information, which can be read by machines. Barcodes store information using a combination of printed parallel lines (bars) and in the spaces that are left between them. Reading stored data is performed using optical readers. More to withdraw funds. Sonect brings retailers new customers and reduces cash distribution costs for banks.

In 2019, Sonect became Switzerland’s largest cash distribution network and started operations in Mexico. Sonect sought strategic partnerships with traditional banks, commercial alliances with major brands, and direct outreach to final users, according to Carlos del Río, Sonect’s then-country manager in Mexico.

License to Cash(Tech)

This license will now massively accelerate our market entry. It also allows us to launch new and affordable financial products and services across Mexico and increase 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 among the population. – Sonect

Sonect has partnered with Arca Continental, Yomp, and the National Association of Breadmakers (CANAINPA), to persuade unbanked businesses, such as small stores (“tienditas”), to become virtual ATMs.

Sonect applied for a license to operate as an electronic paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More funds institution (IFPE) in April 2021. In late August, Mexico’s CNBV granted Sonect the IFPE license. Sonect joins 37 companies authorized to provide fintech services in Mexico.

Cash is King in Mexico

Cash dominates retail payments in Mexico. CurrencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More in circulation grew during the Covid-19 pandemic. Mexicans have not embraced Cobro Digital (Digital Charging or CoDi), Banco de México’s payment solution.

Most Mexicans prefer to use cash in small- and high-value payments. According to the 2021 Financial Inclusion Survey, 90.1% of Mexicans (75.4 million people) use cash to pay for purchases of MXN500 (USD24.78) or less; a slightly smaller share (78.7%) use cash in transactions of MXN501 (USD24.83) or more (INEGI 2022: 25).

Pain Points in Mexico’s Cash Infrastructure

Mexico needs access to ATMs and many terminals are not even near to users. – Efraín Navarrete, Sonect’s former operations and finance manager in Mexico.

 While cash prevails in payments, many pain points exist in Mexicans’ access to cash. Mexico had 59,415 ATMs in 2020, per the National Banking and Securities Commission’s (CNBV) latest Financial Inclusion Report (CNBV 2021a: 12, 31-35). While 95% of Mexicans have access to ATMs, their geographic coverage is uneven, as just 59% of municipalities have a terminal (see Map 1). Most ATMs are in Mexico City, Monterrey, Guadalajara, Puebla, and Toluca.

Map 1. Mexico: ATMs by Municipality, December 2020.

Note: Lighter areas have fewer ATMs, and dark red regions have more ATMs. Source: CNBV (2021a: 35).

• The geographic distribution of ATMs is very uneven: 86.96% of Mexicans live within 7 km away from an ATM, 80.4% live within 4 km, and 74.2% live within 2 km. (CNBV 2021a: 35).
• Mexico’s cash infrastructure is insufficient, particularly in the poorest Southern states. Mexicans living in Southern states take 29 minutes on average to go to a bank branch, nearly double the time of Mexico City residents. Mexicans need 23 minutes extra to go to a bank branch in rural areas than in cities. (CNBV 2021b: 3).

Many Mexicans worry about crime and violence when using cash access points. Most Mexicans in urban areas report feeling unsafe when using ATMs (76.5%) and going to bank branches (62.6%), according to the June 2022 survey from the National Institute of Statistics, Geography, and Computing (INEGI).

Sonect founder Sandipan Chakraborty presented at the Future of Cash Conference, held in Madrid on September 14-16, 2022.

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