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Mexican SMBs Deserve and Urgently Need a New Financial Ecosystem to Survive and Thrive

Today’s technology has made all of these things possible, but traditional banks in Mexico often aren’t motivated to provide this level of service to small to medium-sized businesses

29 de marzo, 2021

By Vilash Poovala

Small to medium-sized businesses (SMBs) in Mexico have an urgent need for support and access to working capital from trusted financial partners. In fact, many simply will not survive without it. One in four Mexican SMBs shut down their operations permanently last year due to the severe economic crisis caused by the pandemic. Without more help than they are currently able to get from government agencies, Mexico’s recovery will be painfully slow, and the key driver of a vast majority (75 percent) of private-sector jobs will stall out.

Unfortunately, traditional brick-and-mortar banks in Mexico don’t have much incentive to provide even basic financial services such as business accounts, credit, and ways for SMBs to be paid, either digitally or via cash. Cash is still the dominant way of exchanging money for goods and services in Mexico, Latin America’s second-biggest economy and the largest trading partner in the world with the U.S. These outdated financial institutions do not serve Mexican SMBs in any meaningful way.

The good news is, there is a rapidly emerging financial force in Mexico and Latin America: neobanks. SMB owners are much better served by these modern-day fintechs that are willing and well-positioned to fill in those critical financial service gaps. My company Oyster Financial, is a leader in putting their SMB customers first, and we are passionate about empowering Mexican SMBs to succeed and thrive.

For many small businesses around the world, a bank account is the equivalent of an engine. Without one, your business simply won’t run, and to run well, your account and all the related business services need to keep pace with your evolving financial needs as well as the daily demands of your customers, vendors and business partners.

Many small business owners think about finances from a purely transactional point of view:

“A bank is just a place where I store my money, and I need a business account that gives me direct access to my funds and allows me to send and receive payments – in cash or electronically.”

True financial management is much more than that, however. It’s the speed and convenience of money movement, as well as understanding the ebb and flow of business operations so management can optimize cash flow and make smarter decisions.

Today’s technology has made all of these things possible, but traditional banks in Mexico often aren’t motivated to provide this level of service to small to medium-sized businesses, particularly in Mexico, where banks focus on their larger accounts and treat SMBs like an afterthought, or worse, an annoyance.

Oyster is leading the way in Mexico with a core goal of disrupting this outdated banking model that overlooks SMBs. We are a champion for small business owners and are here to help guide and advise them for the long-term.

To start, instead of just asking how to get quick, easy access to essential financial services like a bank account, debit card, or credit, SMBs should really be asking: “How can I find the best tools to help me get paid more quickly? How can I enable myself and my team to make better decisions? And how can I help my business grow over time?”

In order to thrive, SMBs need a financial partner that not only understands their needs and challenges, but one that directly supports their overall financial and business health. At Oyster, our vision is to create precisely that: a robust financial ecosystem, built from the ground up with SMBs in mind, that serves as a trusted platform for financial empowerment and success.

Our strategy at Oyster is rooted in the idea that we exist to help SMBs succeed. This makes us laser-focused on our customers’ financial needs and the other challenges they face within the Mexican business landscape. It’s what drives us to look for ways to lower barriers to entry and eliminate other risks that plague SMBs, so they have a greater chance of surviving and thriving — even in a pandemic-ravaged economy.

Several core principles guide our work at Oyster: 

The first two are simplicity and transparency, which are critical to establishing a foundation of trust. From the way our products and services work to our customer interactions, we believe things should be simple to use, easy to understand, and clearly communicated to our users. And we work hard to eliminate time-consuming legwork and red tape on behalf of our users wherever we can.

Like LinkedIn, which invented the first business social network to help its users “find and contact the people (they) need for business through the people you already trust,” Oyster focuses on connecting SMBs with trusted financial services and helping them interact with customers and vendors in ways that traditional banks in Mexico simply haven’t.

At Oyster, this better way to “bank” begins on day one with a streamlined onboarding process that makes it easy for SMBs to start using Oyster’s services right away, instead of enduring endless paperwork and months of frustration with a traditional bank. We have addressed the need for SMBs to be able to send and receive fast, affordable digital payments — and most recently, today, we’ve launched new credit offerings to help cover cash-flow gaps, which is an issue that has been absolutely crippling for many small businesses struggling to survive the pandemic.

The next guiding principle is creating tools and solutions that empower businesses. What does empowering them mean? For us, it’s the ability to work directly with small business owners, to hear their voices, and to build better, faster ways to help them drive their businesses forward. Internally we refer to this core value as evolution, but externally, it’s really about listening.

Our customers’ issues need to be heard and understood at a deeper level so our team at Oyster can improve their financial fitness and develop the right mix of supporting tools and services to enable their businesses to flourish.

Those business-enablement tools fall into three buckets:

The first and most important one is helping businesses get paid. For example, Oyster will soon launch a new tool to help monetize businesses more effectively by getting paid faster using payment links. When our customers want to get invoices paid by their customers, Oyster will automatically find all the different payment sources in the market to help complete the transaction. The business doesn’t need to integrate with PayPal, for example. Instead, Oyster will get them a PayPal account to help attract PayPal customers. A business doesn’t need to attract Mercado Pago users; Oyster will do that for them.

The second is new tools to help our customers grow their businesses. Once we bring funds into an Oyster card, it’s about knowing more about these funds, including their ebbs and flows. Oyster will support SMBs as they decide to grow and develop their business plans or need financial assistance. For example, if we know that a customer is getting paid every seven days, and we can see that a payment hasn’t come through on that seventh day, we can immediately offer the customer a line of credit so they can continue operating their business until that payment comes in.

The last business-enablement tool we are working on is what we call the financial CRM, which provides a snapshot view of our customers’ accounts payable and accounts receivable. The CRM allows SMBs to see how they are performing at any given moment. And, as they say: knowledge is power. Similar to digital must-haves like the Apple Health mobile app that tracks your overall health and helps you make decisions based on that data, like whether to go running or do more cardio, Oyster monitors overall business health so our customers can stay better informed and make critical day-to-day adjustments.

Our final guiding principle at Oyster is about providing safety and security for our customers and their clientele. Safety and security are connected to trust, but they’re also different. Safety and security are related to how we build and design our underlying systems to protect our customers and their clientele from fraud and theft at every step.

For example, we will never openly display a customer’s card number. Obfuscating the number is safer and more secure because someone with malicious intent could be snooping during the transaction. That is just one small yet significant way to show that we’re protecting our Oyster users.

A December 2020 report from the National Institute of Statistics and Geography in Mexico showed that more than a million micro, small and medium-sized companies closed their doors over the previous 17 months. That is a tragic loss, not only for those business owners but for the Mexican economy itself. Who knows how many of those businesses might have survived if they had had better service and more support from their banking partners.

That’s why it’s our mission at Oyster to reach beyond what the old-guard banks provide (which is not much) to serve Mexican SMBs when and where they really need it: helping them ensure the long-term health and well-being of their businesses as they grow alongside Oyster, their trusted financial services provider.

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