By Diego Ore

MEXICO CITY (Reuters) – US retail giant Walmart is aiming to capture the pinnacle of Mexico’s fintech market with its digital wallet Cashi, but analysts say its venture is riddled with potential pitfalls due to the rise of risky customers in the largely untapped market.

Walmart de Mexico (Walmex) announced in April it had bought Trafalgar, a payments app, to compete in a market dominated by Grupo Salinas’ Baz, Oxxo’s Spin and MercadoLibre’s MercadoPago.

Walmart unit executives expect the deal to “unlock the potential of cashi,” beginning with transfers, withdrawals, and wire transfers, while keeping the option open for loans and other financial services going forward.

“We want to be the best application for financial services in Mexico, and that requires constant investment,” Marcelino Herrera, Walmex’s senior vice president of financial services, told Reuters.

The Walmex bet adds to the US retailer’s bid to break into the fintech space, even as market turmoil has fueled jitters about newer forms of financing.

Walmex declined to say what it paid for Trafalgar. The company has announced that it will commit about $210 million to e-commerce and technology — including fintech — in 2023, or 14% of total investment in Mexico and Central America.

Walmart plans to invest over $15 billion in automation and alternative revenue streams in 2023, including its ads business, third-party marketplace and deliveries.

The Bentonville, Arkansas-based chain expects these activities to contribute more to profitability than its core brick-and-mortar retail business over the next five years.

Cashi started in late 2018, but only in stores for Walmex, Mexico’s largest private employer. Purchasing Trafalgar should allow it to be deployed anywhere digital wallets are accepted.

Herrera said low banking penetration in Mexico, where fewer than half of adults have accounts, is an opportunity for Cashi.

“We have 5 million customers visiting our stores every day and the vast majority do not have access to a financial product, let alone a formal credit product,” Herrera said.

Still, analysts say its focus on unbanked or underbanked Mexicans could pose problems for Walmex if it decides to expand Cashi into a lending product.

“The niche of customers that this type of fintech focuses on is very risky,” said Rodrigo Marimon, a financial institutions analyst at Moody’s, citing recent bankruptcies among non-bank lenders, Credito Real, AlphaCredit and Unifin .

Jonathan Stahl, founder of financial and technology education website EduFintech, said Walmex would face risks if it received credit based on historical delinquency rates.

“The credit card would be a major shift in strategy at Walmart,” he said. “It would enter a riskier segment.”

The non-performing loans (NPL) ratio at the Mexican unit of Nubank, Latin America’s largest fintech, was 12.2% in February, above the 11.4% average for microfinance firms, according to official data compiled by Brazil’s Bank Bradesco are quoted.

Nu Mexico’s total consumer credit fell 1.6% in February, beating the 0.4% decline seen by the microfinance industry as a whole, according to Bradesco’s April report.


Walmart hasn’t defined fintech as a top investment priority, but it did pour money into it over the past year.

Walmart invested an additional $200 million in its majority-owned Indian fintech startup PhonePe in March to help it expand into new businesses like insurance and wealth management. PhonePe has over 400 million registered users.

In the United States, the retailer last year announced plans to branch out into digital bank accounts and offer financial services to its 1.7 million U.S. employees and legions of weekly shoppers through its majority-owned fintech venture One , with plans to expand into credit and investment products.

“We’re seeing synergies in financial services … leading us to operate more like a global company and in some ways more like a technology company, creating technology products that can be leveraged across markets more than we’ve done in the past,” said Walmart CEO Doug McMillon in December: “And I think that’s going to be even more true in the future.”

(Additional reporting by Siddharth Cavale in New York and Daina Beth Solomon in Mexico City; Editing by Dave Graham and Mark Porter)


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