Mexico's 600-branch Grupo Financiero Banorte SA has been experimenting with electronic banking to reach the vast majority of Mexicans who have no bank accounts.

Working with NetLink Transaction Systems Corp. of Victor, N.Y. and Fujitsu-ICL of La Jolla, Calif., Monterrey-based Banorte is approaching the unbanked with a smart-card-based system for paying factory workers.

The system capitalizes on the close relationships among small-town factories, their employees, and the general stores that serve them.

The cards use fingerprint biometrics to control access to work sites, disburse paychecks through automated teller machines, and track expenditures at retailers.

NetLink built the system and invited Banorte to participate as the provider of banking services.

In a pilot in the town of Reynosa, 4,300 workers participated and $2.5 million was disbursed. Banorte and NetLink predict that 20,000 people there will be participating by the yearend.

Don Sweet, president of NetLink, said the system lets Banorte provide payroll services and savings accounts at about half the ordinary cost.

Prudencio Frigolet, Banorte's executive director of new technology development, said it thinks it may reach one million factory workers with the service.

He and Mr. Sweet spoke at Technobanca, a conference in Mexico City sponsored by American Banker and InfoBanca, a Mexico City company that publishes the monthly BancaLatina.

Mr. Sweet said the cards will eventually be used for Internet banking and purchasing. Such applications are naturals for factory workers who are managers, he said.

The symbiosis between Reynosa's general stores and its residents could provide a favorable environment for bringing Internet banking to the rest of the town's population.

Javier Romero, financial services partner at Deloitte Consulting in Mexico City, said the Internet could be "a very economical way to reach" the low-income population.

Kiosks at merchant locations are one way to provide Internet access to such people, he said.

Even in Mexico's low-income market, banks are facing competition from nonbanks.

For example Electra, a retailer of furniture, electronics, and other household goods with about 1,000 stores in low-income areas, has begun offering financial services. The company has an agreement with Western Union to offer money transfer services and one with Serfin Grupo Financiero to offer savings accounts.

"Electra has a huge base of clients that the banks are not serving," Mr. Romero said. It is taking advantage of its brand recognition, he said.

NetLink's Mr. Sweet said his company is looking for other Latin American opportunities to use its system. Also, it has just signed a letter of intent with a Middle Eastern bank, he said.

U.S. banks are unlikely to pursue the unbanked market outside their country, though all they need to do so is a license, Mr. Sweet said.

They "are more interested in going after high-net-worth customers," he said.

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