Historical Background of Banking in Mexico
The Banco de México, under the presidency of Plutarco Elías Calles and with Alberto J. Pani as Secretary of Finance, began operations on September 1, 1925. However, this was the materialization of a proposal made a century earlier in 1822 during Agustín de Iturbide’s Imperial rule. The idea was to establish a national bank called the Great Bank of the Mexican Empire, which would issue banknotes similar to what was happening in European nations at the time. The debate during this period revolved around whether multiple private banks should exist or just one, and if so, whether this institution would be private but with a public mission.
During the First Mexican Empire, imperial banknotes were rejected by the public due to the prevailing custom of using coins. In 1823, with the establishment of the Republic, imperial banknotes were withdrawn and replaced with new ones. These were again replaced in 1864 when the Banco de Londres, México y Sudamérica (later Banca Serfín and now Banco Santander in Mexico) was tasked with issuing national paper money. The new banknotes went into circulation on February 13, 1865.
During the Porfiriato, the concession to the Banco de Londres, México y Sudamérica was ratified, and another was granted to the Banco Nacional de Mexico for issuing banknotes with national circulation. Each state was also required to have a private bank issuing its own banknotes. This created a complex system of decentralized, privately-held note-issuing entities.
The Revolutionary Period and its Impact
The revolutionary period saw significant challenges, including the removal of metallic coins from circulation, concentration of reserves by private local issuing banks, robberies, devaluations, and even shortages of money. This led to various factions, including Venustiano Carranza’s, issuing their own paper money, causing chaos due to differences in features, quality, amounts, and economic support of these emissions, popularly known as “bilimbiques.”
Modern Developments and Current Relevance
Decades later, with several constitutional reforms, including the expropriation and privatization of banking and the establishment of Banco de México as an autonomous body, these old problems have been clearly surpassed. As per Banxico’s published information, as of July 2025, the amount of banknotes and coins in public hands is 3,054.7 billion pesos.
Since 2002, polymer banknotes for $20 and $50 have been introduced, extending the lifespan of denominations from 8.3 months (paper) to 28.8 months (polymer), leading to direct and indirect savings associated with this change. However, in the current global context, the trend is towards digital payments.
Current Usage of Cash in Mexico
According to the National Financial Inclusion Survey 2024, cash represents 85.2% of payments for purchases under $500, while physical credit/debit card usage accounts for 10.4%, and electronic transfers or mobile applications account for 4.4%.
For purchases of $501 or more, the respective percentages for the same categories are 73.5%, 19.0%, and 7.6%. Although cash usage is declining, it remains significant compared to other payment methods due to practicality, ease, speed, exclusivity, and perceived security. Other factors include immediate, cost-free settlement for small merchants, lack of connectivity and infrastructure in rural areas, and mistrust among older individuals and non-digital users.
However, using cash as the primary payment method poses security and logistical challenges for authorities and users/merchants, increases transactional opacity and decreases traceability, impacting issues related to resource origins, tax evasion, and potential illicit activities.
Latin American Perspective
The Banco Interamericano de Desarrollo’s recent study, “Beyond Cash: The Digital Payments Revolution in Latin America and the Caribbean,” offers a transborder view of how certain seemingly crucial factors can be managed to achieve significant improvements. For instance, Bolivia, with the highest informal economy rate (80%) among 17 reviewed countries, has made substantial progress since 2022, with a more than sixfold increase in low-value interbank transactions.
Brazil’s PIX immediate low-value payment system is a notable example, integrating 150 million users—almost the total number of adults in Brazil—in just three years.
Conclusion
In conclusion, while the topic is not straightforward and involves multiple economic, technical, and cultural factors, these remain substantial obstacles or disincentives for Mexico, keeping the original quote’s literal meaning relevant.
Key Questions and Answers
- What is the historical background of banking in Mexico? Banking in Mexico has a long history, with the first attempts to establish a national bank dating back to 1822. The Banco de México was officially established in 1925, following a complex evolution involving multiple private and public entities.
- How has the usage of cash evolved in Mexico? Cash remains relevant despite declining usage, representing 85.2% of transactions under $500 and 73.5% for purchases of $501 or more, according to the National Financial Inclusion Survey 2024.
- What are the challenges associated with using cash as the primary payment method? Challenges include security and logistical concerns for authorities and users, increased transactional opacity, decreased traceability, and potential links to illicit activities.
- What is the Latin American perspective on digital payments? Despite challenges, countries like Bolivia and Brazil have made significant strides in digital payments, demonstrating that with proper management, substantial improvements can be achieved.
