As suggested by The Economist, a country once heavily dependent on oil now has Latin America’s largest and most sophisticated industrial base, with the automotive sector at its core. Mexico is surpassed in exports of vehicles only by Germany, Japan, and South Korea.
Its increased competiveness as a manufacturing center is creating a trend for manufacturing companies to move from Asia to Mexico to serve the North American market. Foreign Direct Investment (FDI), reaching historical records every year, is expected to increase to an impressive 30 billion USD this year. Mexico’s macroeconomic stability and the reforms in education, telecommunications, and energy sectors are starting to have a positive impact on individual citizens and the labor market as a whole, subsequently improving productivity and ultimately strengthening overall economic performance. In terms of investment in the manufacture and retail markets, Mexico is establishing itself as the most attractive destination in the entire region.
Swedish success in Mexico
Jacob de Geer and Magnus Nilsson are the founders of the ICT startup called iZettle that launched its first app and service in 2011, allowing anyone to accept digital payments through their smartphone application and the use of a small card-reader that is plugged into the 3.5mm headphone jack on a mobile phone. This technology has revolutionized the masses´ access to the digital payment market in Mexico and elsewhere in the world.
So why does this Swedish start-up decide to take on the Mexican market, in as early a stage as within their first 3 years of operation? In 2012 iZettle hired Thor Philogene to kick-start their Growth Team, with a focus on developing markets. Thor observed an important fact: in Europe, there are about 20 million companies that lack the capacity to accept card payments – in Latin America that figure is twice as high, at 40 million retail outlets, despite almost the same population. Philogene asserts, “It´s not as much what the banks want that drives this market, but rather, what the customers seek.” This is something of great importance in a region that has a colossal amount of small vendors – generally street merchants with only one or two employees. Together, they form a new type of market niche which no longer consists solely of “small enterprises.” Instead, they are referred to as nanoentrepreneurs, and it is precisely these that constitute the core market for iZettle in Latin America. The vast majority of these nanoentrepreneurs lack the capability to accept card payments. In fact, many of them are completely excluded from the financial system, operating in the shadow economy and without the opportunity to even set-up a bank account. This lack of opportunity is detrimental both personally for the individual citizen, as well as for the wider economy (in terms of tax revenues for governmental programs, etc.).
iZettle positively transforms this situation by allowing any person with any type of smartphone to receive electronic card payments, a consumer habit that is increasing by 10% per year in the region (partly propelled by the incidence of street theft, incentivizing cashless options). In describing this modern approach to promoting financial inclusion, Thor uses a most eloquent description: “democratizing innovation!” Another positive aspect of iZettle’s business is that it literally depends on its customers´ growth for its own progress and, as such, is on a commercial journey together with clients. Quite an impressive journey at that! With Business Sweden´s support (including the physical office space), Luis Arceo, CEO for Izettle in Mexico, started the country´s operations on his own, and now, only two years later, his team has outgrown the Business Sweden office in Mexico with almost 40 employees at the time of writing.
If breaking into one of these growing markets sounds interesting to you, we’d love to help you use our expertise to ensure your success.