Sometimes you want to be wrong with your forecasting.
Credit card acceptance came to a halt during the end of summer/back-to-school season in Mexico, as Reuters reports:
- Several of Mexico’s largest banks reported on Saturday that they were experiencing problems processing debit and credit card payments while some shops in the capital informed customers that they would only accept cash payments.
- Banorte, HSBC, and Santander all said on their Twitter accounts that the problem was with the company that was processing card payments and that they were working on finding a solution.
- Reuters’ witnesses in Mexico City said they had their cards declined at different stores and saw others that had put up signs informing customers that their payment systems were down. Twitter users outside the capital reported the same problems.
- It was not immediately clear whether cards other than those issued by Banorte, HSBC and Santander were also affected. The Mexican Finance Ministry did not immediately reply to a request for comment.
Ouch. The Mexican Finance Ministry didn’t respond? The market is mid-stream in a radical payments overhaul know as CoDi. The world is watching. You have to pick up the phone to re-set confidence!
- The failure comes as the administration of President Andres Manuel Lopez Obrador is promoting the use of cards instead of cash in an attempt to clamp down on illicit cash and increase financial inclusion.
Mercator Advisory Group’s recent research on the LAC market, Credit Cards in Latin America and Caribbean: Financial Inlcusion with Risk and Opportunity covers current market trends but cautions that “Infrastructure, fraud, and risk hinder credit card lending in Latin America and the Caribbean.”
Mexico News Daily adds:
- A data center malfunction left bank customers across Mexico unable to make purchases and withdraw cash with their credit and debit cards for several hours on Saturday.
- Prosa, an electronic transaction services firm that processes card payments for several banks, said an electrical fault at its data center in Santa Fe, Mexico City, caused the widespread failure of payment terminals and ATMs.
- Bank customers were also unable to make online purchases using credit and debit cards.
This is not a case study in improving consumer confidence in payments!
- Sources from Prosa told the newspaper El Financiero that it was the first time that a data center malfunction had caused a problem of the magnitude seen on Saturday.
- The service outage raised questions about the reliability of Mexico’s electronic banking system a day after it was revealed that the federal government is considering a ban on the use of cash to purchase gasoline and pay tolls as a means to fight tax evasion and money laundering and to encourage more people to open bank accounts.
Right now, Mexico is rolling out CoDi, a payment system overhaul. The concept is excellent, and the mission is bold, but you need to build confidence for cash-hoarding users to change their habits.
The WSJ highlights Ethiopia and Mexico as two lowly penetrated consumer banking markets and talks about government support.
- Mexican President Andrés Manuel López Obrador likes to say his lifestyle is so spartan that he doesn’t use a checking account or a credit card. But he wants more Mexicans to have them.
- His more-hands-off approach to banks stems from his belief that they can help him fight corruption and stoke Mexico’s economy. Just 38% of adults in Mexico have a bank account, according to a 2017 World Bank survey, half the rate of other countries with similar per capita income.
Mexico’s CoDi could be a global model for financial inclusion, if it can get off the ground. Overloaded terminals on a busy shopping day won’t do that.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group