Home Latin America 2011 2011 – The year of mobile money launches in Latin America

2011 – The year of mobile money launches in Latin America

by david.nunes
Jesus LuzardoIssue:Latin America 2011
Article no.:1
Topic:2011 – The year of mobile money launches in Latin America
Author:Jesus Luzardo
Title:EVP of Global Sales
Organisation:Utiba Mobility
PDF size:1600KB

About author

Jesus Luzardo is the Vice President of Sales of Utiba Americas. Mr Luzardo brings more than 22 years of international sales and operations leadership experience with the Fortune 100 companies and global corporations. He spent 15 years with Motorola Inc. in a variety of sales and operational roles across the Americas, Europe, Middle East and Africa regions. More recently, he held the position of Chief Commercial Officer at LIME (Cable & Wireless Caribbean).

Currently Mr Luzardo is responsible for the sale of all Utiba software and Utiba Americas hosted mobile commerce solutions in the Americas and the Caribbean region. He is based at Utiba Americas regional headquarters in Miami, and oversees the building of regional sales teams, and the opening of regional offices in Mexico and Brazil.

Jesus Luzardo has an MBA and a degree in Electrical Engineering.

Article abstract

Latin America is trailing behind Africa with its mobile money solutions. This can be attributed to regulators in the region favouring a banking-led model. However, mobile operators, supported by a wide distribution agent ecosystem, could be more effective, as seen in Viet Nam. Solutions are likely to appeal to the ‘unbanked’, as in the rural banking system launched in the Philippines. Mobile operators in Latin America consider peer banking with person-to-person money transfers as a key service that would bring perceived value. In Paraguay, Tigo Cash service for domestic remittances has been tested successfully and is set to be extended to other countries. With the main ‘pain points’ addressed, micro-finance commercial deployments in Latin America are ready to be launched this year.

Full Article

Mobile money deployments in Latin America have been delayed compared to Africa and Asia Pacific. Clearly it is not due to a lack of mobile phone penetration, which in many countries is well over 100 per cent. The delay is due in part to a lack of clear, regional regulatory and legal guidelines, which are evolving in most of the countries in the region, but also to the differences in infrastructure and demographics. Specifically, banking service penetration in the region hovers around 40 per cent, and more than 60 per cent of the population lives in urban centres, close to banking facilities. Significant retail and distribution channels also exist throughout the region. So what do these demographic and infrastructural differences mean to the evolution of mobile money services?

The strength and development of banking institutions regionally means that regulators are more inclined to give a controlling role in mobile money services to financial institutions. Throughout the Latin America, we see significant trends toward the adoption of a bank-led regulatory model, unlike many other regions of the world which have allowed the Mobile Operators to offer mobile money services independently. This regulatory model forces alliances between mobile operators and financial institutions, which often do not necessarily share the same corporate objectives or culture. This may be seen as a reason for the delay in the launch of services in the region. A unique case (so far) of bank–led regulation is that of the Central Bank of Ecuador which plans to provide a single mobile wallet platform for the entire country. This is an example of a regulator taking an active role to accelerate financial inclusion, the process by which financial services are extended to the unbanked population.

A second factor is the existence of developed retail and distribution channels, formal and informal, point to the potential of third party service providers independently offering mobile money services. This model was successfully adopted in Vietnam by M-Service. M-service started as an operator agnostic electronic recharging provider and has since grown to become the country’s largest prepaid distributor, offering recharging of accounts for all seven mobile operators with over 80,000 points of service nationwide. M-service is now marketing its mobile commerce services under the name of momo which includes the purchase of game credits and utility bill payment. The company looks to offer person to person money transfers once they have authorization from the State Bank of Vietnam. Similarly in Latin America, regional airtime distributor, Movilway, is deploying electronic recharging and mobile commerce services throughout the region.

Regardless of the delay, we see mobile money services taking off within the region, with the most potential among the unbanked. To achieve success in this market segment, payment service providers (banks, mobile operators, or third party payment service providers) will have to create a compelling value proposition for end users, ultimately one that saves them money. Mobile money doesn’t compete with credit card services or other financial instruments – it competes with cash. To convince a person of any socio-economic status to put hard cash into a mobile wallet, you need to provide a compelling reason.

In the Philippines, the Rural Banking Association of the Philippines (RBAP) and Microenterprise Access to Banking Services (MABS) have been particularly successful in developing microfinance services on the G-Cash platform that provide real cost and time savings to the microenterprise clients that use them. G-Cash customers can use their mobile wallet to make microloan payments, pay bills, make purchases and send money to relatives and friends. They have successfully identified an end user “pain point” and solved it with mobile wallet services.

Mobile operators in Latin America appear to have chosen the person to person money transfer service as a most compelling end user use case. Paraguay has served as a test bed for Luxembourg-based mobile operator Millicom with its Tigo Cash (Giros Tigo) mobile wallet system which will be expanded to the rest of its Central and Latin American properties in 2011. Tigo Cash has primarily focused on domestic remittances as a particular ‘pain point’ for customers in the region.

At the same time, there are several initiatives being brewed by governments in Latin America for social benefits disbursements using mobile money as a vehicle to do it effectively. Other private micro-finance institutions, with the help of international organizations, are planning to launch mobile micro-finance programs in countries like Peru, Colombia, Ecuador, Mexico, and Central America. These government initiatives coupled with the private mobile micro-finance will help to ‘kick start’ the lifting of the wallet barrier, and will provide a cost effective method of distributing these benefits and financial programs.

2011 promises to be the year of mobile money launches in Latin America, a year of catching up. The regulatory environment will continue to evolve and provide clearer commercial frameworks for financial services. Commercial deployments will finally take place in multiple countries of the region and the unbanked may finally have access to this powerful means of financial inclusion.

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