|Issue:||Latin America 2014|
|Topic:||Growing the financial services footprint in Latin America|
|Title:||VP & Payments Lead for LACC|
Luis Cirerol is vice president and payments lead for LACC at Fiserv. He is responsible for developing business payments in Latin America, Caribbean and Canada.
Previously, Luis worked for MasterCard where he was Vice President of Emerging Payments for Mexico and Central America in charge of chip EMV migration, e-Commerce, contactless payments and mobile payments. In his role, he led the implementation of innovative solutions, highlighting the implementation of chip EMV cards in Mexico, Colombia and Venezuela, contactless cards implementation in Bermuda, Colombia and Mexico and e-Commerce solutions such as MasterCard SecureCode in LAC.
Luis Cirerol has more than 15 years of experience on the payments industry in institutions such as Banamex Citibank and BBVA Bancomer as a pioneer of the first banking products based on new technologies in LAC such as chip cards and e-Commerce. He was also in charge of the New Technologies committee at the Mexican Banking Association.
Luis has a bachelor’s degree on Industrial Engineering by the Universidad Panamericana in Mexico and a Financial Products Diploma by the Instituto Tecnológico Autónomo de México (ITAM).
Latin America looks to be falling behind other locations in investing in mobile banking and payments. According to research Fiserv conducted at Sibos 2013, only four percent of executives attending the annual SWIFT conference pegged Latin America as the region for greatest investment in the technology in the coming year.
For the vast majority of consumers in the developed world, having a banking relationship is part and parcel of daily life – consumers expect to see bank branches on the high street, interact with banks on digital channels and make payments securely using cards. This infrastructure is often difficult to implement in emerging economies, with challenging geography and economic concerns making it difficult for financial institutions operating on a branch led traditional basis to serve customers in an efficient and profitable fashion. In certain cases, this also extends to pockets of the population in developed economies as well.
The challenge of bringing banking services to this segment of the population has been given an immense boost by technology, however. The pace of change is not limited to emerging economies but is happening just as fast in developed markets as well. In developed markets the transformational shifts are brought on by the growing presence of non-banks and new governmental regulations driving greater transparency in the financial payments ecosystem. In developing economies, the goal is to lift millions out of poverty through financial inclusion initiatives. Some examples, Australia, Singapore and the UK are working hard to realize the promise of real time of payments. In Cambodia, Colombia and India mobile phones are helping extend banking services to consumers who’ve never even had a bank account. With penetration rates increasing rapidly, the rise of mobile phones as a cheap, reliable and easy method for communication offers the solution to financial institutions looking to make banking available for hard-to-reach communities across the globe.
The rise of mobile
The growth of mobile has contributed to the eight to ten percent rise in non-cash payments annually and an even larger increase in the number of non-financial transactions which all leads to greater engagement for the financial institutions who can deploy the technology effectively. However, Latin America looks to be falling behind other locations in investing in mobile banking and payments. According to research Fiserv conducted at Sibos 2013, only four percent of executives attending the annual SWIFT conference pegged Latin America as the region for greatest investment in the technology in the coming year. In another study, Latin America trails the rest of the world in the average number of banking transactions conducted on a mobile device. This is surprising, as mobile penetration in region is strong, but only 17% of the population are considered ‘active users’ of mobile banking apps versus 29% in Europe.
Across Latin America, mobile penetration is relatively high :
Country Brazil Mexico Argentina Colombia Costa Rica Peru Chile
Penetration 124% 89% 142% 100% 101% 98% 129%
Smartphones Penetration 14% 20% 20% 7% 10% 11% 30%
Embracing a new channel
Until very recently, banks had not realised the full potential of the mobile channel – even for high-earning customers. Banks have been slow to recognise the transformational nature of mobile, a technology that can offer distinct advantages to customers in varied locations, whether in developed or emerging markets. The ubiquity of mobile devices globally is changing the way people interact with businesses and each other, and that’s a game-changer for payments. In many countries, the number of mobile phones in use now surpasses the number of consumer bank accounts. Companies that provide services on these mobile devices have been quick to realize the potential of supporting a variety of payment transaction types for their existing customers. These include alternative payments providers like PayPal, Alipay in China, Yellowpepper in Latin America, as well as telecommunication providers like Vodafone, Tigo in Africa and Latin America, and Globe in the Philippines. The list continues to grow, and global brands like Google, Apple and Facebook are also exploring options on how best to participate in the digital payments ecosystem. These companies see an opportunity to get a piece of the payments value chain at the point of engagement and drive greater monetization of their customer footprints.
Even within the same country the mobile channel can be used in multiple contexts. An urban resident with an established banking relationship can apply for a credit using a smartphone, while those in far flung communities could be making utility payments electronically, rather than in cash, using feature phones.
For the unbanked, it is by offering banking services via the mobile channel that financial inclusion can be greatly improved in developing economies. There are also very real everyday problems unbanked individuals face that these services can address.
In Mexico City, for example, city workers often send money back home to their families in the towns; if they do not have a bank account and they only use cash, they have to give the money to a local agent who charges a high commission to send money back home. In Mexico and Colombia, a majority of people pay their utility bills with cash, so people often have to queue – at biller offices or other merchant locations – this is a huge drain on time and often requires people to travel significant distances at significant cost to pay their bills.
While there are typically fees associated with all transactions, including mobile transactions, in Latin American markets such as Mexico, Colombia and Peru, paying the fee for a secure, simple transaction would for many people be well worth the cost. Furthermore, over time, these fees will likely reduce, as more banked people will lead to greater competition to serve them.
Mobile is already showing its potential in developing markets the world over. In Southeast Asia, for example, ACLEDA in Cambodia has deployed mobile banking solutions that offered existing customers a compelling set of mobile banking, alerting and payment capabilities. ACLEDA then expanded its services to make mobile financial services available to the 85 percent of Cambodians who were without a formal banking relationship, allowing them to make P2P payments, bill payments, mobile phone top-ups and even cash deposits and withdrawals via ACLEDA branches, ATMs and offline offices. It is high time that financial institutions in Latin America offer the same services.
Serving all customers, building a better bank
Customers aside, for banks the potential of the mobile channel is remarkable. Mobile is a virtual, self-service channel that allows financial instructions to provide cost-effective, easy-to-use products targeted to specific segments – allowing banks to better serve existing customers while attracting new ones.
As well as offering basic financial services to underbanked and unbanked consumers in both developed and emerging markets at profitable levels, customers who are already banked become more engaged as they are able to more frequently check balances, transfer funds and complete other tasks.
Across emerging market deployments from Fiserv within various countries, more than half of consumers who sign up for mobile banking and payment services are ‘net new’ to the bank. And most of those are new to banking altogether.
Non-bank operators such as Yellowpepper and Tigo have been quick to realise this and looking to rapidly roll out customer financial services, putting customers first. Often more agile than financial institutions, non-traditional operators can speed up deployments without having to worry about complex legacy technologies impacting roll out. Banks in Latin America need to be careful not to see their relationships with existing and potential customers fragmented as mobiles become the choice method of moving money for consumers everywhere, and non-traditional organisations step in offer the service.
The opportunity to leverage the mobile channel to reach, engage and bank the underbanked and unbanked is clear.
For the unbanked individual, the opportunity to move from a cash only economy and engage in the banking system, enabling them to save with interest and borrow at reasonable rates, creates value over and above just the money, making banking a force for social good. For the bank it is a way to profitably serve a whole segment of customers who otherwise have traditionally not been able to be engaged, many of whom will in the future substantially improve their wealth and thereby become customers for increasing services and products.
These benefits mean that it is time for financial institutions in Latin America to move quickly to implement appropriate technologies and strategies tailored to the regions they serve, taking advantage of positive government input on financial inclusion and the proliferation of mobile technology. This will enable them to out manoeuvre non-traditional rivals and secure new customers as they build lasting relationships with individuals in emergi