Citibank is betting on new technology to penetrate the Mexican fintech market. The $2.2 trillion-asset bank this week invested an undisclosed sum in Arcus, a New York City-based payments and fintech API platform focused on Mexico and other Latin American markets. 

“The fintech opportunity there is growing a lot, so there’s really strong fundamentals in a country of that size where the financial services available to the population has not been as modern,” said Luis Valdich, managing director for the venture capital group at Citi Ventures. 

Arcus’ technology uses an API to connect banks, fintechs and merchants to a host of billers throughout Mexico. According to Valdich, it’s one of two nonbanks connected to SPEI, Mexico’s ACH system. Citi aims to see a return on the investment, while deepening its push into Mexico through Citibanamex, its Mexican subsidiary. 

Valdich said consumers in Mexico still tend to make payments in person, and an estimated 42 million Mexican consumers don’t have a bank account, according to Reuters. This leaves a major opportunity for a fintech like Arcus. The company’s API provides a single point of entry for banks and nonbanks alike to connect to a vast network of payment rails. With Arcus, banks and fintechs can provide consumers with insights on balances and due dates, while online merchants can launch digital wallets and the ability to pay subscription fees from an app. Brick-and-mortar retailers, meanwhile, are able to accept cash deposits for consumers, turning point-of-sale operations into de facto bank branches.

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Arcus, which works with BBVA, Santander, Walmart, 7-Eleven and Uber, among others, is likely to face competition in Mexico. Galileo, the payments and API platform behind big names like Chime and Robinhood, announced its own expansion into Mexico in April through a collaboration with Mastercard. Galileo’s push into Mexico could open the door for its prominent clients to move into the market. 

“Financial inclusion begins at the enabling layer, which is where Galileo focuses,” Tory Jackson, Galileo’s in-country manager for Mexico, previously told Bank Innovation. “You have almost 130 million people [in Mexico]. Many of them have smartphones, but not that many have bank accounts.” 

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