Costs and risk of cash handling is a major issue for large companies operating in Mexico. What are the initiatives to reduce the use of cash?
In January 2014 the Mexican government enacted a Financial Reform that aims to foster the inclusion of the unbanked in the financial system. The National Banking and Securities Commission (CNBV) and the central bank (Banco de Mexico) issued a regulation in March regarding, among other things, the merchant acquiring business. This establishes the terms and conditions in which these services must be provided.
This regulation has five principles, which are: fostering competition, enhancing infrastructure and reduction of costs and commissions, free access to the market, no discrimination and consumer protection.
With the enactment and supervision of these principles, the financial authorities aim to have a broader set of participants in the market, not just banks but other financial intermediaries, such as cooperatives and microfinance institutions that issue more debit and credit cards that can replace cash, and particularly having more financial terminals installed in small commerce to allow for electronic transactions to occur.
At the same time, the 2014 tax reform eliminated the Tax on Cash Deposits. In order to allow the Tax Administration Service to continue receiving information on cash deposits, financial sector institutions have to report cash deposits that are made to the accounts of taxpayers when the accumulated monthly amount of cash deposits in all the accounts that a taxpayer holds in a single institution in the financial system exceeds 15,000 pesos. All the acquisitions of cashiers’ cheques must also be reported. This measure improves the tools the SAT has in order to fight against tax evasion through the excessive use of cash.
Furthermore, the deduction of expenditures of a company in Mexico must be backed by a digital tax receipt issued according to article 29 of the Mexican Tax Code, and those payments that exceed 2,000 pesos should be made through electronic transfer of funds, personal cheques, credit, debit or service cards, or by means of an electronic pocketbook.
The Mexican authorities want to see more usage of debit and credit cards instead of cash transactions, particularly in small operations such as payment of public transportation, purchases in convenience stores and payments to professionals.
What steps are you taking to foster financial inclusion via mobile payments and other cashless initiatives?
There is great potential for increasing mobile payments in Mexico. There are more than 100 million mobile phone numbers while there are only around two million savings accounts linked to mobiles.
From a regulatory perspective, the Ministry of Finance, the National Banking and Securities Commission and the central bank have promoted relevant changes to facilitate mobile banking.
To help product development, the authorities modified the rules for savings accounts depending upon the monthly deposit amounts that the customer makes or receives. Depending on the tier of an account, procedures vary as well as the type of transactions that a customer can perform. For example, national or international wires, or if the account can be open remotely or must be opened with the customer present in a bank branch.
The central bank recently issued regulations to promote more money transfers between savings accounts linked to mobile phones. The regulation allows linkage between a bank account and the account holder’s mobile phone number. It abbreviates the requirements for mobile transactions. This means originating banks require the amount to be sent, the beneficiary’s mobile phone number and the beneficiary bank’s identifier. It allows banks to charge a fee (supervised by the central bank) for mobile payments. And by July 2015, mobile payments made throughout the Mexican Real Time Settlement Payment System operated by the central bank must be processed, at the most, within 15 seconds and with availability 24/7.
Additionally, in an effort to promote financial inclusion and foster the use of bank accounts, Mexican authorities are promoting the electronic disbursement of government subsidies and payrolls through bank accounts.