Crypto emerging as the new frontier in Mexico remittance market

• FXC Intelligence publishes a deep dive report looking at the use of crypto in the $59bn US - Mexico remittance corridor.
• Report finds that crypto companies looking to tap into the Latin American remittance market should start in Mexico, given the market's size, consumer's embrace of digital currencies and its strong growth in digital payments.
• However caution is needed as substantial challenges remain in the way of crypto remittance providers making large headwinds in Mexico.

Today, FXC Intelligence published a deep dive report looking at the potential for crypto in the US-Mexico remittance corridor.

It's not surprising that crypto giants are vying to carve out a slice of this ripe-for disruption market. The size of this corridor cannot be overstated and is currently positioned as the largest in the world, with flows surging to $59bn in 2022 according to FXC Intelligence's market sizing data, with further significant growth forecast as we head into 2023

Its existence is vitally important to Mexican families, with around 1.6 million Mexican households relying on payments from family members in the US as their most important source of income.

And since 2020, Mexico's population is growing increasingly crypto-curious, making the market ripe for the picking. 

Alex Kirk, author of the FXC report says:

"Traditional service providers closed their doors to the public during the pandemic, pushing consumers towards seeking alternative methods to send remittances.

"The on-average young population exhibit enthusiasm and willingness to adopt new technologies, including using crypto and traditional payment methods interchangeably in their daily operations."

The FXC intelligence report identifies two main advantages that crypto remittance platforms are able to provide to customers: cost and speed. In 2021, the global average cost of sending remittances was 6.3% of the overall payment, according to the World Bank, which crypto remittance services could significantly reduce. 

And crypto transfers are practically instant, compared to direct account deposits which can take up to five days.

Already, four key companies have already realized the opportunity and have launched or planning to launch crypto remittance services in this lucrative corridor: 

• Belfrics
• Bitso
• Coinbase 
• Moneygram

The most common strategy has been to partner up with local providers for their expertise because by working in tandem they can ensure swift entry to the market and start carving out what could potentially be a smart niche in the industry.

However, as Daniel Webber, CEO and founder of FXC intelligence warns, there are significant challenges in the way of companies gaining a foothold in this space.

"Crypto remittance providers would be wise to start in Mexico if they're looking to tap into the Latin America region. However it is not a given that there will be wide pick up of crypto remittance services from the get-go.

"Expect adoption to be slow - there is still a lack of knowledge about crypto tools and the technical nature of crypto platforms is likely to stifle uptake among customers.

"And the recent reputation hit to crypto following difficulty in global markets will make would -be customers resistant to using crypto remittance services, at least for the time-being."

Mexican citizens still prefer to use cash when making payments with some predicting that by 2025 Mexico will be one of the only major countries in the world where cash will continue to represent the most common point of sale payment method.

And when compounded with low financial literacy rates, there is only a limited viable user base for crypto remittance to target.

FXC Intelligence will continue to monitor the success of Crypto remittances in Mexico and the wider Latin American region - it will be interesting to see how the crypto trailblazers will navigate the challenges facing adoption and take advantage of the momentum provided by the growing remittances industry. 

Additional information

• Find the full report here. 
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