Mexican regulators need to break up an effective monopoly in the country’s credit card payments network that is benefiting big banks and hobbling startups in Mexico, said a new study commissioned by a group of financial technology firms.

While regulators across Latin America have helped financial startups gain ground, Mexico is letting the country’s largest banks set the rules, according to a copy of the study seen by Bloomberg News. The 71-page report sponsored by Fintech Mexico was prepared by a consultancy led by former trade chief and NAFTA negotiator Luis de la Calle.

The country’s top banks control Mexico’s two clearing houses for transactions, E-Global and Prosa. In effect, the study said, there is just one network and its run like a monopoly. That is making it harder for local startups like Clip and Conekta or global giants like Stripe and MercadoLibre Inc. to compete against the country’s largest banks, according to the study.

The report calls on Mexico’s central bank and the CNBV banking regulator to enforce a 2020 recommendation by the country’s antitrust commission’s investigative unit that top banks sell off their controlling stakes of E-Global and Prosa, among other measures, in order to foster fair play and draw more Mexicans into the formal banking system.

Prosa said in a statement to Bloomberg News that it has promoted competition over its 50 years in Mexico by enabling at least 200 different types of financial businesses, including fintechs, and that it has always followed the frameworks established by authorities.

"We will continue to innovate to strengthen competitiveness in Mexico and offer the best products and services,” Prosa said.

The central bank, CNBV and E-Global didn’t respond to a request for comment.

"Mexico has the historic opportunity to have competition between various payment networks and not continue with a monopoly, but to do this, it has to put an end to the conflict of interest where the banks own the clearing houses,” the study says.

E-Global is owned by Banco Bilbao Vizcaya Argentaria, Citigroup’s Banamex unit and HSBC Holdings Plc, and Prosa’s biggest stakeholders include Banco Santander, Grupo Financiero Banorte, Bank of Nova Scotia and again HSBC. Those same banks have significant market share of credit and debit card transactions.

Banorte, HSBC and Santander declined to comment. Scotiabank, Banamex and BBVA didn’t immediately respond to a request for comment.

 - Bloomberg