By adaptive - July 25th, 2016
The countries of Latin America offer unique and compelling opportunities for mobile payments, especially given the proliferation of mobile devices in the region. But as Ruben Martinez reports from Bogota in the first of two installments, there are significant cultural and technological hurdles to clear before uptake becomes widespread.
Emerging economies in countries such as Brazil, Mexico and Colombia have populations keen to adopt new technologies and to rethink the way people participate in everyday economic activities.
Latin America is also a region with mobile penetration exceeding 100 percent. That means that there are more mobile phones (lines) than the area’s population. But it’s also a region where only 51 percent of its adult population has access to banking services, according to the World Bank.
This contrast shows the great opportunity in the region to increase local consumers’ economic participation via mobile technologies, in particular mobile payments.
There are several subjects that need to be addressed when analyzing the mobile financial opportunities in Latin America. One key area is the unbanked, or the financial inclusion of people without access to banking services.
Most of the unbanked population in the region lives in rural areas; areas where the smartphone penetration is considerably lower than in urban sectors.
55 percent of the mobile users in Latin America use feature phones that can access the Internet but lack “smartphone” functionality, so clearly there’s a large population of unbanked people using this type of mobile device.
Ana Aguilera Bañón, LATAM Mobile Money manager for Telefónica, says in order to reach these feature phone users, a short message service (SMS) must be considered as part of any financial strategy. That’s because the feature offers a massive non-exclusive service, whether the strategy is offering mobile banking services or simpler inclusion services such as mobile wallets or mobile payments.
But beyond technology, Bañón says financial and tech firms must win the hearts and minds of the unbanked: “There are two key points regarding cultural trust in mobile payments. The first one is the challenge to build trust with the unbanked. You must be able to deliver the message where they see value in changing the way they use money. So you must be able to deliver trust and value to encourage them to use mobile money.
“The second point is that the unbanked trust more in a telco than in a bank,” she continues, “Telcos offer a transactional service, time selling, which resembles money transfers. So that is why telcos are the key players in mobile money, they have the infrastructure, the technology, the know-how and the closeness to the consumer.”
According to Aguilera, the telco is the key player, but it’s not the only one. She says the mobile operator should lead the ecosystem into mobile money but local businesses, banks, government and the telecommunications companies are all part of this ecosystem. She says everyone must invest, and be invested, in making mobile payments a reality. It is not a matter of competition, it is a matter of cooperation.
To be continued in the next OMM update.