How Fintechs Can Harness IMSS Data for Fraud and Credit Risk Workflows
July 25, 2024
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Nicholas Bouchard
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July 25, 2024
Nicholas Bouchard
Cash is still king in Mexico. More than half of the population of Mexico is unbanked, meaning they don’t use any banking institutions. Compare that to only 4.5% of households in the US.
With so little reliance on traditional financial institutions, any fintech or neobank has an opportunity to become a huge financial player in Mexico. Imagine being the company that brings modern, reliable online banking to the country’s unbanked population? But without the credit history, financial data, and identity confirmations fintechs are used to relying on in other regions, how are you supposed to provide your usual services?
Here’s how you can use IMSS data to do this.
IMSS stands for Instituto Mexicano del Seguro Social or Mexican Social Security Institute. It’s a social welfare institution that manages pensions, social security, and public healthcare in Mexico for private sector employees. Unsurprisingly, this organization handles a ton of data every day, including:
The Instituto de Seguridad Servicios Sociales de los Trabajadores del Estado, or Institute for Social Security and Services for State Workers, manages many of the same benefits as the IMSS but specifically for federal government workers. That means they handle data for healthcare records, employment, wages, social security, pensions, and other benefits.
About 44% to 55% of Mexicans receive benefits from either the IMSS or the ISSSTE. That makes the IMSS and the ISSSTE essential sources of data for organizations operating in Mexico.
Fintechs and similar organizations typically rely on data from financial institutions, lenders, and government agencies to manage everything from verifying a user’s identity to confirming their income and evaluating their credit risk.
In Mexico, with so much of the population unbanked or underbanked, financial institutions aren’t as reliable of a source for this sort of data.
That’s why IMSS data is an important alternative. Through this institution (or the ISSSTE for federal employees), fintechs looking to serve Mexican users can access the following data.
This includes names, nationalities, dates of birth, and national ID numbers (Mexico’s equivalent to the social security number). This information can help you confirm any ID you receive through other sources, adding redundancies to your ID verification methods and protecting you from fraud.
Employment status, wage information, and contributions to Mexico’s social security system are part of IMSS data as well. That data is crucial for evaluating someone’s credit risk and income since many transactions in Mexico still use cash and full consumer credit files aren’t as common as in other countries. That can make it difficult to properly assess an individual’s financial needs or determine how much you’re willing to lend them.
Both the IMSS and the ISSSTE handle data related to pensions, retirement benefits, disability benefits, and other social security benefits. This gives you a more complete image of a user’s financial situation. That data is essential for some financial services.
By pulling data from the IMSS and ISSSTE, fintechs and other organizations can get a complete picture of a potential customer’s financial situation. That said, there are some noticeable problems with using this.
In other countries, open banking partners are a great place to start for capturing net income. While it can still be challenging to parse out different income sources, from cash payments to bonuses and refunds, it's something. Because Mexico is still a bit behind in implementing open banking, these partners are rarely available, and income data often doesn’t make it to the bank account, making alternative data income sources like IMSS and ISSSTE even more valuable.
That means getting that data has to be done manually on the user side. This comes with some issues.
If your organization doesn’t have direct access to IMSS and ISSSTE data, the burden falls on the user to gather and provide that data. That means manually accessing their services, downloading statements, sorting through documentation, and sending the right information to you at the end of it all.
Needing a user to do all this manually means they’re more likely to drop off during your onboarding, or might even be completely unable to provide the documentation you need. As the fintech space in Mexico gets more and more competitive, your customer acquisition costs will just keep increasing. Any potential hurdle in accessing your services can keep prospects from converting, meaning you lose anything you invested in acquiring them. This might cause some growth-centric companies to try taking shortcuts here, which carries huge risks.
According to TransUnion, digital fraud attempts have risen by 122% from 2019 to 2022 for digital transactions that originate in the United States. The trend is similar in Mexico, which means that fintechs and similar organizations have to be doubly watchful for potential fraud and other scams. When you can pull data digitally right from a financial institution or government agency, you can alleviate some of these risks.
Not so when everything’s done manually.
When the onus is on users to provide you with the documentation you need, fraudsters and scammers have an opportunity to try and push through with partial documentation, modify statements, or outright forge them.
Because it’s so difficult to get all the data you need from the IMSS and the ISSSTE, you might struggle to build an accurate risk profile for each potential customer. That, combined with a desire to grow, might mean giving out financial services you’d usually reserve for people with a different profile. You simply don’t have enough information to make the right decision.
That leaves you exposed to a greater risk of defaults, which obviously have a serious impact on your bottom line.
At the end of the day, all other problems involved with using IMSS data for customers and users in Mexico mean increased costs for any services you provide. If you have to be more watchful for fraud, defaults, and similar risks, you need to build redundancies in your workflow like extra training, extra checks, or even just slower processes overall. That eats into your profit margins, making providing services in Mexico more of a challenge. Some products and services might be completely unavailable.
Deck provides access to alternative data sources—like the IMSS and ISSSTE—for fintechs, startups, and any other organization that wants to offer seamless services backed by robust, secure data. Using a single CURP number (a unique identifier for every citizen of Mexico) you can get direct access to the data you need through a form or secure widget embedded right in your platform.
With Deck, you can authenticate a user’s IMSS or ISSSTE account and retrieve the data you need in a few seconds—from KYC to employment and income data—directly from government sources. This can be done through both a no-code solution or your own custom platform built on API calls.
No more forcing users to manually source and send statements. That means less fraud, fewer defaults, and a better, frictionless experience for your users in Mexico.
Want to more about how this works? Check out our full guide here.
Fintechs are giving everyone better access to custom financial services that aren’t restricted by the baggage of more traditional financial institutions. But while providing these services in the United States (and similar regions) relies on tried-and-true data and technology, giving that same level of service to users in Mexico can be more challenging. By harnessing IMSS and ISSSTE data, you can prevent fraud, verify identities, and get thorough employment and income data. And if you use Deck, you can do all this digitally and automatically.
Our ideal world is one where everyday problems are not caused by inaccessibility of data, and we want to do everything in our power to get there as fast as possible.
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