Open Finance fintech Belvo taps labor data to boost lending in Mexico

Fintech startup Belvo is expanding in Latin America as progress in Open Finance paves the way for new lending opportunities.

Last month, the Mexico-based open finance company announced its latest product. It will provide its clients with access to updated employment data at the Mexican Social Welfare Bureau, one of the largest official databases in the country and potentially a key driver in lending to the underbanked.

The goal is to reduce the financial inclusion gap in the country by providing banks and fintechs with a new data point to conduct a risk assessment. The underbanked segment has little to no credit history in traditional bureaus, for which new data points could be crucial in expanding access.

Open Finance is a data framework that allows clients to share financial information with a network of registered financial institutions. The overarching goal is to help lenders better assess risk quality and offer cheaper rates.

Building Open Finance infrastructure

The new initiative by Belvo represents another building block in this emerging infrastructure. It will allow clients to connect directly with official employment data on the IMSS platform.

“We became a one-stop-shop for the needs of any lender in terms of income verification through open finance,” Pablo Viguera, CEO and co-founder, said. Belvo argues that this new product allows lenders and card issuers to increase the addressable market without necessarily taking on more risk.

The potential for exploring new data sources is huge in Latin America. By the end of 2022, the Social Welfare Bureau in Mexico had more than 21 million jobs registered.

Open Finance regulation has been growing in the region in recent years, with Brazil already implementing it and Chile on its way to doing so with its latest fintech law. Open Finance is already embedded in the 2018 fintech law in Mexico, although the framework has not yet been fully defined.

One of the most underbanked markets in LatAm

Federica Gregorini headshot
Federica Gregorini, General Manager at Belvo Mexico.

The second-largest economy in Latin America, Mexico is yet one of the least banked populations in the region. Just two years ago, just 40% of adults had some kind of bank account in the traditional system.

Although that number rose to almost 50% last year, it still presents a significant gap compared to other big-sized economies in the region. This potential has drawn the attention of prominent players such as Nubank, the largest Brazilian digital bank.

But the lack of official information challenges fintechs looking to tap into the vast Mexican underbanked market. Just 32.7% of adults in the country had a loan offer last year from the banking sector, according to data provided by Belvo.

“Current ways to verify consumer income, such as credit bureaus or internal risk models, only have data for a limited part of the population, which is often inaccurate or outdated,” the fintech said in a release.

Belvo makes first acquisition in Brazil

Originally from Mexico, Belvo expanded to Colombia shortly after its founding in 2019, and in 2020 it arrived in Brazil. The company reports significant clients in Brazil, such as Mercado Libre, Rappi, and traditional lenders Itaú and Bradesco.

Last month, it announced its first-ever acquisition. A few weeks after receiving a payment provider license from the regulator, Belvo said it bought 100% of Skilopay, a Brazilian fintech specializing in payments through Pix.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.