The distribution of financial services infrastructure in Mexico is a product of several generations of economic geography that have concentrated services in urban areas and avoided the smaller cities, towns, and rural areas that house a large share of the Mexican population. Many millions of Mexican residents who live outside the geographic distribution of the infrastructure that makes up the financial market have been excluded from its benefits: that is the bank branch that requires a two-hour bus ride; the investment service that demands a minimum account size of more than a year’s discretionary income; the brokerage relationship that assumes a formal employment history and a credit profile that informal economy workers lack. Online forex trading has broken some of those barriers, and is evident in the engagement of communities that have never been adequately served by formal financial services provision.
The mobile internet infrastructure that has enabled this penetration has grown as the result of both government connectivity initiatives and the business logic of allowing mobile carriers to compete by making it economically viable to cover a large unserved market that would have been considered too thin for traditional telecommunications infrastructure investment under previous business models. In a region of Mexico where the traditional characteristics of a viable financial service are lacking, mobile internet access can meet the data needs of running a trading platform, and video streaming is the first way for most inhabitants of those towns to learn about forex trading as a concept. The lack of infrastructure between financial services and telecommunications has fostered the unique circumstances in which online trading in forex reaches communities before market participation options.
The remittance economy, which links Mexican towns to their relatives who have jobs in the United States, has established a particular financial system that has formed a channel for money remittance in communities lacking formal banking systems. The financial connectivity facilitated by money transfer services has allowed for international transactions in Mexican towns that have large migrant worker populations, even in the absence of traditional banking systems. For some, the same channels that receive dollar-denominated remittances have also become channels through which remittance recipients can become involved in foreign exchange markets, opting to do so by trading accounts that rely on the infrastructure already in place for remittance transfers rather than on the traditional banking ties that formal financial services require as prerequisites.
The socio-structural characteristics of the Mexican community knowledge exchange that flows through small-town communities are distinct from those found in the more urbanized trading communities that exchange information more heavily through anonymous online channels. When the person in a small Mexican community begins to trade and tell their story, the information is passed on to the whole community via relationships that implicitly carry responsibility that anonymous internet testimonials do not. That responsibility is reciprocal; that is, positive experiences spread with the credibility of personal vouching, and negative experiences with the same and added social weight of harm to a trusted community member, rather than an anonymous stranger.
Risk management education in these communities should be able to address the unique economic vulnerability that would be created for households with a small financial buffer when they participate without proper preparation. It is a maxim that retail traders should only risk money that they can afford to lose, but this concept of affordable loss has a much different meaning in a Mexican town household compared to an urban professional one, given the different meaning of loss in that context. The communities where the more experienced participants in online forex trading have taken the responsibility of education seriously enough that they consider these special circumstances instead of applying the generic risk management advice they have picked up from other groups who have different economic backgrounds are the ones that are developing the most responsible relationship with online forex trading.
Ultimately, what online forex trading in Mexican towns without local brokers represents is the market’s ability to expand access to financial markets beyond the institutional geography traditionally created by financial services infrastructure. When used with proper preparation, expectations, and risk management, the extension is real and truly beneficial for the participants. The problem the extension poses is that it needs to be accessible, but more importantly sustainable; it must be accessible by the trading community, by the regulators, and by the educational and regulatory infrastructure it creates, as this is where market education will take place through the more costly process of active trading.