#121: OXXO Beyond a 'Proximity Store': how the payments vertical is transforming Mexico
W FINTECHS NEWSLETTER #121
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Lately, it feels like any empty spot on a busy avenue or street quickly transforms into another OXXO — the iconic red and yellow convenience store. Cities like Bogotá, Mexico City, and São Paulo have witnessed this expansion up close. The red and yellow branding became synonymous with the company's aggressive growth strategy.
Small local businesses watched the rise of the OXXO chain with a mix of admiration and resentment — how could they compete with an operation backed by FEMSA, one of the world's largest beverage distributors?
I recently visited Mexico and saw firsthand how a network of stores can drive significant changes in countries grappling with financial inclusion challenges. A few months ago, I wrote about the enormous opportunities Latin America offers for digitalization, but also about how overly rapid digital strategies can alienate users and run into structural barriers.
Brazil, in this regard, is an outlier. Specific reforms and conditions created the perfect environment for the rapid adoption of Pix and other financial innovations. In other countries across the region, the reality has been quite different — or, at best, innovations arrived with high expectations but delivered underwhelming results. It’s precisely in this context that physical retail locations become valuable tools in financial inclusion strategies, blending convenience, modernity, and technology to drive progress.
What OXXO is doing in Mexico is a clear example of this. The chain has been active in financial services for quite some time, creating an ecosystem of products and solutions that include loyalty programs, payment apps, remittance services, and bill payments.
The recent partnership with Nubank, which allows the neobank to use OXXO stores as cash withdrawal and deposit points, highlights the need for gradual transformations that align with local needs and realities. This initiative builds on what the chain has been doing since 2012 with its Saldazo brand.
From a sip of beer to a glass of Coca-Cola: the story of FEMSA
Behind OXXO lies a corporate giant that has mastered the art of testing and adapting its growth strategies over the years — from straightforward moves to bold innovations. FEMSA began as a simple brewery in 1890, a local business with limited expansion prospects.
Among its many strategies, acquiring the Coca-Cola franchise in Mexico in 1979 stands out as one of its most successful moves, becoming a cornerstone in the company’s history. From a sip of beer to a glass of Coca-Cola, FEMSA steadily grew, cementing its significance in the Mexican economy.
Milestones in its journey
Founded as the Cuauhtémoc Moctezuma Brewery, the company spent its first 50 years building a vertical integration strategy. During this time, it expanded its operations by creating a range of complementary businesses, including glass factories, bottle cap production, distribution networks, steel manufacturing, and even a bank. These efforts laid a solid foundation, enabling FEMSA to control every step of the production and distribution process.
The model of not relying on external suppliers made the company nearly unbeatable. This approach not only boosted production capacity but also shielded operations from external fluctuations — a strategy that many major companies have adopted today, such as Amazon, which controls its logistics, or Tesla, which manages its battery supply chain.
In 1936, the company took a strategic step by consolidating its operations under a single conglomerate, VISA, strengthening its focus on the beverage sector while simultaneously pursuing diversification.
To expand more strategically, the company decided to split into two entities: ALFA, which focused on packaging, steel, and chemical products, and VISA, which retained the bank, brewery, and vertical operations. The turning point came in 1979 when VISA acquired the Coca-Cola franchise in Mexico. This move not only expanded the company’s portfolio but also secured its prominent position in the market.
Under the FEMSA name and with control of Coca-Cola, the company became a national benchmark, gaining even greater prominence in the beverage market. However, its foundations were tested in 1982 when the depreciation of the Mexican peso destabilized many companies and forced the sale of non-essential assets. In a landscape where many were desperate to offload their holdings, FEMSA recognized the value of Coca-Cola in its portfolio and decided to keep it — a decision that, over time, proved to be one of the company's greatest assets.
From Beverage Distributor to Convenience Empire
One clear takeaway from FEMSA’s history is that diversification has always been in its DNA. The company was built to be a brand conglomerate — a challenging approach, especially in a country with economic instability, but one that also allowed it to test and enter new markets. The birth of OXXO followed this logic: in the same year VISA went public on the Mexican Stock Exchange and a year before acquiring the Coca-Cola franchise, the company opened its first OXXO store in 19781.
The idea was to create a convenience store chain that addressed the growing demand for proximity and accessibility in retail. The convenience store concept perfectly aligned with the urban growth of Mexican cities and consumers’ need for quick, accessible options.
The transformation from a brewery to a beverage giant, and then to a convenience empire, is remarkable. Two key factors define this story: identifying market gaps and filling them with a speed that few giants could match — all without suffering significant losses.
This is how FEMSA built a conglomerate divided into three main pillars: Coca-Cola FEMSA, the world’s largest Coca-Cola bottler by volume, producing and distributing beverages; Digital FEMSA, which created a digital and financial ecosystem leveraging data and analytics with initiatives like Spin by OXXO and Spin Premia; and Proximity & Health, notable for its impressive geographical expansion and commitment to meeting customers’ everyday needs, “being a good neighbor.” This division also extends to the health sector through pharmacies and gas stations under the OXXO GAS brand in Mexico.
And What Do the Numbers Say?
In OXXO's early years during the 1980s, the division posted loss after loss. Few within the company saw its potential. The available data begins in 2001, so I analyzed the numbers from 2003 and 2023 (available 👉 here). The 2023 version of OXXO is undoubtedly more agile and efficient than the 2003 iteration, reflecting not just an increase in store count but also the company's enhanced ability to create digital ecosystems.
Store expansion has consistently exceeded targets: in 2023, OXXO opened 1,408 new locations, surpassing the forecast of 1,300. As we’ll see, a deep understanding of customer needs resulted in a 14.2% increase in revenue, a higher average ticket size, and greater foot traffic in stores2. Operational efficiency, already evident in 2003, has become even more pronounced with the integration of technology — primarily through the emergence of FEMSA Digital3.
At the group level, consolidating all its companies, FEMSA achieved a 17.7% growth in revenue, reaching 702.7 billion Mexican pesos (34.4 billion USD). This growth was driven by store expansion both in Mexico and abroad and the robust performance of the "Proximity Stores" division, which saw revenues grow by 19% and gross profit rise by 20%. Coca-Cola FEMSA also maintained its stronghold in a highly competitive market.
The company is not only expanding geographically but also adapting to new consumer demands with initiatives like Spin Premia, the brand's loyalty program, and Spin by OXXO, a digital payment platform that now boasts over 8 million users.
The Landscape of Mexico's Financial System
FEMSA's digital division has been driving changes that extend beyond the company itself, directly influencing how Mexicans pay and consume, given that its network is one of the largest in the country.
Before diving into how OXXO is making this transformation possible, let’s take a step back to understand the conditions FEMSA’s digital division encountered in Mexico’s financial system and how these shaped its approach.
The Numbers Behind Mexico's Banking System
There are various ways to address structural challenges, and international experience shows that effective public policies—such as implementing real-time payment systems or public data-sharing infrastructures—must have clear objectives, be measurable, and adapt as needed. The success of Open Finance in Brazil and the UK is a testament to this approach.
In Mexico, the Fintech Law was introduced as an innovation-focused framework, as the constitution does not allow specific regulations without a general legislative framework. However, the lack of ongoing technical assessments and institutional instability at Banco de México and the CNBV have hindered the progress of agendas and the execution of priorities.
This is evident in the numbers: in 2017, only 37% of the population had bank accounts — compared to a 73% average across Latin America by 2021. 4.
The structural issues in Mexico are significant, particularly in the credit sector, where low-limit cards come with high costs, forcing many consumers to turn to the informal market. A prime example of this occurred in June 2024, when comparing Classic and Basic cards with credit limits between 8,000 and 15,000 Mexican pesos, where the interest rates reached as high as 111.4% annually, considering the CAT (Total Effective Cost, which includes interest, annual fees, and charges).5. With 58% of the workforce lacking formal employment 6, a large portion of the population cannot prove their income and, as a result, is excluded from traditional credit.
While 63% of employed adults have a bank account, only 26% of those outside the workforce have access to these services7. Few Mexicans have enough data to generate a credit score, creating a vicious cycle: without data, they can't get credit, and when they try, the high rates push them further into debt.
The goal of this text isn't to delve deeply into Mexico's financial system, but one thing I'd like readers to realize is that OXXO knows how to play the game with the rules that are part of it. They haven't tried to reinvent or change everything at once; they're adapting and gradually gaining ground through investments in fintechs, acquisitions, and slowly mastering the rules. And that leads us to:
How did OXXO become a 'proximity store' that goes beyond convenience?
OXXO became more than just a convenience store and transformed into a true data machine and an integrated network, solidifying itself as FEMSA's secret weapon.
I’ve been sharing for some time now that every company is a data company. In edition #116, I mentioned that financial institutions are turning into data companies, and indeed, this is happening. As the market becomes more commoditized, the differentiator will be how to use data to predict and personalize experiences, and FEMSA has been building this.
A bank, a telecom, and OXXO as the country's largest banking agent
The network realized the potential to transform its stores into banking agencies back in 2012, when it launched the Saldazo card, with the support of CGAP. In partnership with Banamex (part of Citigroup, one of Mexico's largest banks) and Telcel (the largest mobile carrier), OXXO created a simple and accessible financial solution, allowing many customers to open their first bank account.
The project saw impressive growth, with 290,000 new accounts per month, according to 2016 data 8. As a result, the network became Mexico's largest banking agent and the only retailer at the time offering a bank account branded with its own name in partnership with a bank.
What started with a single bank quickly grew into a banking agent for over 10 institutions, offering greater flexibility to customers. By 2016, excluding cell phone top-ups, each store was handling an average of 68 financial transactions per day, compared to 31 operations in 2013.
The key was the combination of a nationwide network with simple account opening requirements: all you had to do was go to any store, present an ID, pay an initial fee of US$ 1.70, and optionally provide a mobile number to activate the transfer service — the opening process took 4 to 4.5 minutes.
In addition to offering a bank account, the brand used data to map customer behavior and optimize its services, offering everything from basic items like breakfast and lunch to payments, gift cards, bus tickets, and the Saldazo card. With 8,500 cards sold daily and 81% of customers linking their card to a mobile phone, OXXO achieved impressive adoption, with 61% of accounts active and an average balance of $209.
FEMSA's moves
FEMSA’s and OXXO's involvement with payments continued to grow over time. They invested in Conekta’s Series A round in 2016, a payments startup, and established a partnership that allowed OXXO stores to accept cash payments for over 5,000 digital services, making the Mexican network the go-to place for people paying utility bills or renewing their Netflix subscription.
At this point, we see that OXXO's involvement with financial services can be divided into two phases. The first began with the partnership with Banamex and Telcel, laying the foundations for the realization that "OXXO is also a banking agency." The second phase came with the rise of digitalization: as stores became agencies and fintechs struggled to fully migrate their users to digital, OXXO became both the bridge and the destination.
The partnership with Stripe, for example, allows any company using the payment platform to sell its products through OXXO Pay, which now represents more than 30% of transactions in Mexico. The process on Stripe is simple: the customer chooses OXXO at the e-commerce checkout, and a barcode is generated for the transaction. The customer then pays in cash at OXXO stores, where the payment is processed, and the online business receives confirmation as soon as the transaction is completed. It’s the perfect combination of physical and digital in a country where 60% of the population is unbanked and 130 million people have smartphones. As Enrique Culebro, head of Mexico's internet association, told Reuters:
"Mexico runs on cash. This is the huge advantage of a company like OXXO"
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The OXXO data ecosystem
A convenience store is just a convenience store if it doesn’t go beyond the basics; a gas station is just a gas station if it doesn’t offer more value than fuel; and a pharmacy is just a pharmacy if it’s not integrated. But what if we integrate all of this into a single ecosystem? Ecosystems require several components, and the key one is data integration. OXXO has done this smartly, with an integrated vision.
Looking at the ecosystem above, you can see how OXXO is dominating multiple aspects of the consumer’s life, which certainly brings competitive advantages. The company maps every step of the customer journey in Mexico. The Spin Premia loyalty program, for example, collects valuable data on consumption habits, allowing for the personalization of offers and improving the customer experience. When leveraged well, data analysis allows OXXO to fine-tune its inventory and direct promotions according to each store's, customer's, and region's profile. In other words, each OXXO is more than just a store: it’s a data collection point and a strategic channel for the digitalization of the Mexican economy.
Spin by OXXO is another channel for achieving this strategy. The platform enables payments in pharmacies, online platforms, as well as bill and tax payments. The goal is to avoid the bureaucracy of Mexican banks, with no bank fees or complex processes. While it has limitations, such as the need to regularly add money at OXXO stores, Spin offers a practical solution for those seeking financial alternatives without the need for a traditional bank account. This proposal has been well received by Mexicans, resulting in the growth of its user base.
The union of physical and digital for emerging markets
Of all the Latin American financial ecosystems I've had the chance to get involved with in recent years — such as those in Brazil, Colombia, Chile, and Mexico — Mexico always surprises me when I dive deeper. The country has its particularities, which make the environment challenging but also very interesting for someone curious like me.
Institutional instability — clearly reflected in the country’s position of 118/142 in the WJP Rule of Law Index, which assesses the quality of institutions — political deadlocks, and a growing economy, but without significant leaps, similar to the Brazilian scenario, make Mexico a complex entrepreneurial environment.
Over the years, while writing for W Fintechs, I’ve spoken with several Mexican investors and entrepreneurs, as well as others interested in entering the country. Few have managed to adapt to its complexities. And, to be honest, I understand them. To succeed in this environment, it’s not enough to just have capital: enormous resilience is also required in every aspect.
In developing markets, the physical still leads the way to the digital. Many consumers are familiar with the physical world, digital infrastructure is limited, and trust in digital platforms is still developing.
OXXO understood this and not only transformed its stores into small banks but also used this approach to enhance its operations and gain deeper insights into its customers.
In a country where the physical still dominates, FEMSA has leveraged the power of the duality between physical and digital. Many entrepreneurs attempting to expand into Mexico and other Latin American countries, with similar characteristics, make the mistake of focusing on digital without first conquering the bridge that will lead users there. OXXO, in Mexico, is not just that bridge, but I believe it is also the destination — its expansion is impressive, and its numbers speak for themselves.
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Until the next!
Walter Pereira
Disclaimer: The opinions expressed here are solely the responsibility of the author, Walter Pereira, and do not necessarily reflect the views of the sponsors, partners, or clients of W Fintechs.
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