Mexico launches CoDi, a new digital payment platform for financial inclusion

What is CoDi?

The Mexican Central Bank, along with the Mexican Bankers Association (ABM) and the Mexican Association of Popular Financial Societies (AMSOFIPO) launched the digital payment platform Cobro Digital or CoDi (Digital Purchase), based on QR codes and near-field communication (NFC) technology used in mobile phones.

CoDi will allow individuals to buy and sell goods and services through the country’s SPEI system (wire transfers) which can be carried out 24/7. Transactions will not incur any commissions or fees even between different banks. There are currently 33 participating banks, and it is envisioned that other financial institutions will join the programme voluntarily.

How does CoDi function?

The CoDi system will allow anyone holding a savings account with the participating banks to quickly and easily make wire transfers for their purchases ranging from a few cents up to $8,000 Mexican pesos (approx. $400 USD or €370 EUR), directly from their mobile phones by scanning the business’ QR code or by using an NFC enabled terminal. The system will also work for purchases made over the internet in the same way by scanning the QR code provided.

The system will be free of charge. Banks recognize that its value lies in the data obtained through the system, such as where people make purchases, what these purposes are and the overall customer experience.

What is the purpose?

This system intends to provide Mexicans with more options to carry out payment transactions in a country where cash is king. It aims to foster competition amongst payment service providers, an industry which has boomed in the past year by offering different intermediary and digital solutions for credit card and digital payments.

Furthermore, CoDi looks to include a typically excluded segment of the population who do not have access to traditional banking and payment services but do own a mobile phone. This will help achieve greater financial inclusion, with hopes to bring more people currently doing business in the country’s large informal market into the financial system. The Mexican Central Bank also hopes to reduce the amount of cash used in everyday transactions and increase the number of taxpayers who evade fiscal authorities by dealing only in cash and do not report their transactions and operations with the country’s internal revenue service.

Outlook

During the test runs the system was well-received by the private sector and the population at large. However, care must be taken to ensure the security of the system and that application maintains functionality on days where a large amount of transactions are expected to take place, such as on payday.