Last year, we published the podcast episode Finding Fit - Opportunities in the Global South, and a follow-up essay entitled Why are Paga and Migo expanding to Latin America? A data-driven exploration of the Global South.

In the podcast, we heard anecdotes from entrepreneurs about the similarities between regions, and concluded that market expansion comes down to two overarching drivers: market size and under penetration. And in the essay, we attempted to quantify and compare market size and under penetration across select markets in Africa, Latin America and Southeast Asia using various proxy data points.

What we learned about Mexico is this: high GDP, large population (it would be second largest in Africa), high urbanization, relatively high smartphone penetration, as well as high internet connectivity and usage. At the same time, Mexico also has a very low banked population, in spite the above characteristics.

Despite comparatively positive environmental and consumer characteristics, Mexico is still an overwhelmingly cash-based economy. Despite prime conditions - and, indeed, arguably better conditions than most African markets - for adoption of digital services, almost everyone still uses cash.¹

So if the competition is with cash, what lessons can the African tech ecosystem learn from Mexico?

I suspect I'm preaching to the choir, but it's worth reiterating - getting consumers to use digital services, and therefore less cash, is not necessarily correlated with the rate of ownership and usage of internet-connected mobile devices. In informal markets, fintechs, banks and governments alike need to provide utility and convenience that is greater than the conveniences that cash currently provides.

This is something we talked about at length in another past podcast episode, with Nomanini's Vahid Monadjem, whose approach starts by acknowledging all of the advantages of using cash: quick transaction time, interoperability, zero fees, privacy, and so on.

My experience in Mexico City is an ever-pertinent reminder of the degree to which understanding one's customers and the local context matters.

--

Hasta luego,

Justin

‍