Both credit cards and credit system have their own significance and they are used in different markets according to the needs and demands. Mexico may not be on the top charts while looking at the developed countries but by looking at its condition, it surely is. Credit cards are the invention of the developed world. The people living in Mexico uses both systems depending upon the market they are going in. Generally, having a credit card ensures that a person is rich. Because of the ownership of the large amount, rich people keep their money in the bank, and having a credit card means they are carrying their whole bank in the pocket and can use as much money from their account as they want. On the other hand, mostly the poor people do not have any credit card because the amount of money they own can be easily carried in the form of cash and they do not require to pay any large amount.
Two-sided economy:
Mexico is one of the fine examples if we have to look at the country living with a two-sided economy. Both the economies have different situations. One among them is enjoying success with a trillion-dollar total national output. While the other economy illustrates that more than half of the population is living under the bottom line. The financial difference between Mexico is ranked as the second most significant level when compared with 34 countries that are part of the Organization for Economic Co-activity and Development (OECD). The World Economic Forum says about Mexico, “the base 10% on the pay rung discards 1.36% of the nation’s assets, while the upper 10% discard practically 36%.”
The nation has figured out how to push forward regardless of destitution, defilement, pay the difference, and the presence of enormous casual financial area. As indicated by the International Monetary Fund (IMF) a casual financial area is included cash making “exercises, both lawful and illicit, that amount to trillions of dollars a year that happens ‘under the table,’ out of the look of taxmen and government analysts.” The World Bank orders Mexico as an “upper center pay” country. Mexico’s $1.283 trillion (GDP) makes it the fifteenth biggest economy on the planet regarding ostensible total national output while putting it on the 11th spot as far as buying power equality. Mexico is the second-biggest economy in Latin America after Brazil and is additionally an oil trading country. The diagram beneath, from the World Bank, shows the yearly rate development pace of GDP at market costs dependent on consistent nearby cash (A Ten Kate, 2019).
Small markets (merchants):
There are a lot of small markets in Mexico. The merchants working in this market do not carry any digital system for receiving credit for the trade. They rather demand the payment through cash. The reason behind this is that the business of the small merchants or the small market does not involve the use of a large amount of money. For example, how much money do you think a small grocery shop on the corner of the street would be earning? This is the same case in this situation. Such small merchants depend upon the daily earning and so is their system of living works. For the ease of such traders, it is always helpful to carry cash. The people of Mexico who go shopping in the areas with small markets are most likely to carry cash with them and do the payment in that way (Vargas-Canales, 2018).
Relation of economy and credit cards or credit system:
Agriculture is one of the parts of the Mexican economy that helps to raise the economy of the country. You might be thinking about what the economy has to do with credit cards or credit systems but it a lot do have in common. It depends upon the economy of a country that what sort of ways will they be using for trading purposes. If the economy of a country is poor, then fewer people will be seen to use credit cards while if the economy of the country is rich, it indicates that more people will deposit their large sum of money in the banks and will be drawn towards the use of the credit cards.
Agriculture (source of the economy):
Switching back to agriculture plays a vital role in developing the economy of Mexico. Agriculture, which incorporates ranger service, fishing, chasing, domesticated animal creation, and development of yields, contributes a simple 3.5% to Mexico’s GDP. The offer has stayed underneath 4% throughout the previous 15 years. By the by, agribusiness, or the essential area, assumes a pivotal part in roundabout ways for the Mexican economy. The essential area has helped in reinforcing exchange attaches with the United States just as in reducing destitution mitigation and making occupations. Agriculture gives work to about 14% of the country’s workforce. Nonetheless, in rustic regions, the greater part of the populace may be engaged with agrarian exercises. Mexico’s horticultural area can be part into two sections: 1) resource cultivating reliant on incompetent workers in the provincial regions and 2) profoundly serious fare arranged to cultivate. While agrarian fares ranches have assisted with lifting the profit and way of life of certain representatives, they have additionally increased the pay imbalance among farming laborers. The World Bank chart beneath shows the commitment of the rural area since 1980 to Mexico’s total national output (Tauro).
Credit cards in Mexico:
The major monetary foundations are advancing the utilization of Credit cards in Mexico, giving purchasers more alternatives to back their buys yet additionally raising the degree of customer obligation. In a report distributed toward the beginning of March, the Comision Nacional Bancaria de Valores (CNBV) said customer obligation rose by 7.7% in the last quarter of 2004 and by an aggregate of 26% for the whole year. The expansion was ascribed essentially to an expansion in charge card utilize a year ago. Credit cards remain generally an undiscovered market since Mexicans actually use the money for 86% of their exchanges. The pattern is evolving, be that as it may, in light of the fact that Mexico’s biggest banks are dispatching forceful new advancements to go after potential Credit card clients. A few banks like BBVA-Bancomer are focusing on the lower-or center pay purchasers who customarily have not utilized Credit cards for their buys. “This is an intriguing business sector that has not been tapped by the banks,” said Rodrigo Manrique, head of BBVA-Bancomer’s Credit cards division. The banks are viewing for the lower-pay clients with the huge retail tasks like Wal-Mart and Tiendas Coppel, which offer store cards to customers who generally have not had admittance to credit or even a financial balance. The retailers have a preferred position since they are not as rigid as the banks, which regularly require that candidates have in any event a month to month the lowest pay permitted by law of 5,000 pesos (US$446) to get a card. The entanglement for lower-pay customers is that retailer-gave cards regularly convey a lot higher loan fees than those offered by the banks. Better quality retailers like Palacio de Hierro and Puerto de Liverpool are additionally rivaling the banks in the Credit cards market for the more affluent clients (Cordova-Rangel).
Growth of credit cards in recent years:
Credit card numbers grow quickly in recent years The forceful mission to support Credit card utilization has delivered profits for the financial business, with the number of new Credit cards gave in Mexico ascending by 23% in 2004 alone. An aggregate of 11.6 million credit cards was available for use before the year’s over, contrasted and 9.4 million at the end of 2003, as per industry reports. Some industry sources gauge that the credit card market in Mexico has expanded by 20% in the course of recent years. “All the banks are keen on going into the matter of charge cards in light of profitability,” said expert Angelica Bala of Standard and Poor’s monetary rating organization.
A few investigators note, in any case, that the quantity of credit cards in Mexico is still a lot lower than in Latin American nations like Brazil, Argentina, and Chile. The new credit card clients, alongside buyers with existing records, have not wondered whether or not to depend on plastic to fund new buys in the previous few years. Some bank authorities credit the pattern to some extent to simpler terms offered by numerous retailers. “There is a wide range of advancements,” said Eduardo Diaz, delegate overseer of the Credit cards division at Banamex-Citibank. “Be that as it may, the proposal of no interest installments for a while has demonstrated to be the main consideration empowering the utilization of Credit cards.” (Zbinden).
Some industry watchers propose the forceful advancements have changed the capacity of Credit cards in Mexican culture. “Regardless of the overall discernment in Mexico that Credit cards are just or chiefly utilized in crises, lower loan fees have prompted an adjustment in charge card utilization designs,” said Euromonitor International.
Experts are as of now extending development in the number of Credit cards in Mexico, with an expansion of maybe 20% every year through 2010. “To arrive at the degrees of Argentina, the number of Credit cards would need to twofold, suggesting an expansion of 20% over each of the following five years,” a New York speculation financier told Reuters (Guerra, 2017).
Shoppers likewise face expanded obligation trouble
The expanded utilization of Credit cards has been joined by an expansion in paying off debtors, making weight for working-class and lower-pay cardholders. As indicated by certain assessments, the past due obligation to banks has expanded by 26% this year, to a great extent as the aftereffect of Credit cards.
The issue is turning out to be such a worry that the public authority office responsible for monetary security for buyers (Comision Nacional para la Proteccion y Defensa de Los Usuarios de Servicios Financieros, CONDUSEF) made the extraordinary stride of asking Mexican shoppers to limit their utilization of Credit cards during the customarily weighty get-away time of Holy Week (García, 2017).
Monetary foundations have started to refuse to compromise against delinquent credit card holders, recruiting legitimate firms to assume responsibility for assortments. “They utilize a wide range of techniques to make assortments: scares, dangers, affronts,” said the Mexico City day by day paper El Universal, which noticed that the gatherers even go to the homes of indebted individuals to by and by handing them dispossession takes note. CONDUSEF authorities state the assortment strategies utilized by the banks and the lawyers they have recruited now and again go too far. “The way that one has an obligation doesn’t give the leaser the option to turn to badger,” said Rafael Avante Juarez, CONDUSEF’s overseer of legitimate undertakings.
The Mexican financial area is likewise confronting analysis for different practices that hurt the public premium, for example, offering low loan fees on reserve funds while charging the high rates on Credit cards. By and large, banks have been paying loan costs going somewhere in the range of 2.99% and 6.08% to investors while charging incredibly high rates on their Credit cards. Moreover, banks have been blamed for being miserly with their credits, particularly in the business area (Herman, 2017).
The degree of bank advances to business organizations has expanded by just about 4% during the previous year. Interestingly, buyer loaning fundamentally through the giving of Credit cards has almost significantly increased in the previous four years.
The Bottom Line
Mexico has incredibly profited by its worldwide arrangements of deregulation, most outstandingly the North American Free Trade Agreement (NAFTA). The deal not just made the biggest deregulation zone on the planet, yet additionally establish a framework for the development and thriving of the United States, Mexico, and Canada. Since its presentation in 1994, the U.S. what’s more, the Mexican economy has gotten progressively incorporated with solid exchange and inventory network joins. Today, Mexico has a huge, broadened, and solid economy with its oil area, settlements from the United States, sends out, farming, mining, the travel industry, and mechanical action assuming the main parts in its development. In any case, the nation likewise experiences issues like defilement, an immense casual economy, drug cartels, and pay imbalance which should be handled to guarantee manageable development.
Credit card accessibility:
There are as yet numerous regions of Mexico where individuals don’t have promptly accessible admittance to the banking framework. In those regions, there is far less utilization of credit and check cards. In any case, there are a few activities of the government that are endeavoring to utilize cards as a method for conveying government benefits. Thus, these regions may start to expand their use of banking administrations, including Credit cards.
Banks in Mexico:
There are various banks working in Mexico and all have different credit items for singular clients. Vehicle credits, home loans, and individual advances are generally accessible. Probably the greatest distinction is the financing costs charged on advances from Mexican banks. Since the peso isn’t as steady as some different monetary forms, for example, the U.S dollar, the Canadian dollar, or the Euro, loan fees are altogether higher.
On account of the high loan costs, not close to the same number of Mexican’s make huge buys on layaway as do U.S. residents. Specifically, contracts are substantially less mainstream. Numerous Mexicans stand by until they have accessible money prior to making a land buy. Regularly, purchasing a house is done throughout an extended timeframe. Purchase the part first. Stand by a couple of years and afterward start the development. Get the fundamental structure fabricated at that point stand by a couple of more years. Add some extra “finish” at that point stand by some more. At last, total the last periods of development and move in (Vera, 2018).
Credit card framework:
The credit framework in Mexico depends on far fewer factors than in the US. In Mexico, the credit department for the most part just considers advances for huge buys, for example, vehicle and home advances. This implies that it tends to be more earnestly to begin in the credit game since none of the ordinary practices, for example, covering your utility tab or having a ledger, tally towards building a record of loan repayment. This is the reason numerous individuals wind up purchasing their first vehicle or home with the assistance of relatives.
Credit cards have gotten significantly more famous throughout the most recent couple of years. The ‘ x number of months without interest’ plot is so mainstream you can even purchase staple goods with Credit cards and afterward not compensation interest on that buy over a specific number of months (Clemente, 2018).
Country zones and little urban communities don’t have the foundation to help credit/charge cards. This is partly because of the absence of the Internet, which is required for a business to have the option to handle installments made with Credit cards. Another factor is an absence of trust in the financial framework and an absence of instruction as a rule and specifically about funds. One more factor is that an enormous level of the nation isn’t on the finance of a business and is rather paid in real money. A large number of these individuals are unbanked and don’t approach programs like Infonavit, which is an administration association that gives home credits. That being stated, there are a few banks that are more adaptable.
Though at the moment more people are using the credit system in Mexico the use of credit cards is also being paid much attention and it is expected that in the near future most of the trade-in Mexico will shift to credit cards.
