Can Mexicans be weaned off an addiction to cash?

Among Mexico’s rich and poor, cash is unusually persistent. At the tortilleria, petrol station and on toll roads. Anything from lavish weddings to private medical fees can be paid for in banknotes.

For purchases under 500 pesos (about $30), about 85 per cent of Mexicans say they mostly use cash. Informal companies and workers fear having to pay tax if payments are processed through the banking system, and card transactions can cost small businesses 2 to 4 per cent of each sale.

But the reliance on the physical peso is an anomaly for a middle-income, complex economy, which is also the biggest trading partner of the US. And the current system has costs.

Cash enables tax evasion, corruption and crime. Monthly bribes from the Sinaloa cartel to a host of public officials were allegedly paid from a large box of cash, according to a recent US indictment. Politicians are among the most enthusiastic users of cash, with campaign finance experts saying just a fraction of donations are formally declared.

After previous attempts failed, the current government says it is about to make a serious push to digitalise the economy. President Claudia Sheinbaum has entrusted one of her closest advisers, José Antonio Peña Merino, to co-ordinate a plan for mass adoption of digital payments. He — and others — say she wants it to be part of her legacy.

“The president had this in her head from the beginning, from the transition,” he said in an interview. “In 2027, at least 50 per cent of adults will make at least one digital payment. I think it’ll be higher than that honestly . . . In the end, if you make a product that solves a problem, it’ll be adopted.”

There are reasons for scepticism. Seven years ago the central bank launched Codi, a payments platform comparable to Brazil’s wildly popular Pix. But consumers barely noticed as banks and businesses did not promote it and the user experience was clunky.

Peña Merino said his team had looked at two of the world’s most successful examples, India’s Unified Payments Interface (UPI) and Pix. In both, cash use fell precipitously and was replaced with free account-to-account payments, cutting out card fees.

Sheinbaum’s plan has several components including simplifying and promoting Codi, and encouraging informal businesses to open a new kind of online bank account that is not linked to a tax ID. She has pushed and will mandate digital payments at petrol stations and toll road booths.

Peña Merino, who digitalised much of the capital city’s government while Sheinbaum was mayor, oversees a newly created federal Agency for Digital Transformation and Telecommunications with a sweeping remit. Mexico’s social programmes are an obvious place to start, he said. The government will dish out almost 1tn pesos ($57.3bn) this year mostly to the elderly, students and disabled.

Under new central bank rules, all banks in the country will have to adopt a standardised user experience for Codi, with options of using phone numbers and usernames to send payments, by the end of the year.

The banking sector says it is on board. “It’s the starting point to reduce informality, improve productivity, increase the tax take, increase financial inclusion and even reduce crime rates,” said Emilio Romano, head of Mexico’s banking association ABM.

The policy’s success will depend on whether the new Codi experience is good enough, and whether Mexico’s informal sector, which accounts for more than half of workers, believes the benefits outweigh the fear of eventually being taxed.

Some big companies are jumping ahead already. Rapidly expanding discount retailer Tiendas 3B (the Bs stand for Good, Nice and Cheap) is piloting stores accepting only cash and Codi to cut out card fees. Peña Merino said they are in talks with companies such as Pepsi, Grupo Modelo and others that supply small shops to expand digital payments. These companies have hugely complex, and sometimes risky, cash-movement operations in far-flung places in Mexico.

“They get to places almost no one else does,” he said.

The irony is that if Mexico succeeds, it could face a different kind of problem. The Trump administration put tariffs on Brazil this year, partly saying that its Pix platform has treated US payment companies unfairly. Given the problems cash currently represents, that might be a risk Mexico is willing to take.

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