Published on December 18, 2008
M-Banking: Opportunities and barriers for the development of Mobile Financial Services in Latin America and the Caribbean Washington DC, November 20th 2008 http://movilybanca.afi.es
Opportunities and barriers for the development of Mobile Financial Services in Latin America and the Caribbean • Methodology: – Analysis of international best practices – Study of the environment for MFS in LAC and, particularly, in Bolivia, Brazil, Dominican Republic, Ecuador, Mexico and Peru – Recommendations for MIF intervention • Cooperation with Fundación Telefónica: – Workshops in Ecuador, Colombia, Peru, Argentina, Brazil, Venezuela and Chile – Dissemination: Forthcoming publication + blog • Peer review by David Porteous (Bankable Frontier Associates) 2
• 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Sp ai U n ni te d St at Source: Honohan (2007) es C Regional background hi le Pa na m a Br az il U ru gu ay C ol o m bi a Ec ua do r G ua te m al a Bo liv ia Pa ra D gu om ay in ica n R ep . Ar Low access to formal financial services in LAC ge nt in a Ve ne z ue la El Sa lva do r Pe ru H on d ur a s M ex ico N ica ra gu a 3
• - 5.000 10.000 15.000 20.000 25.000 M Source: IADB (2008) ex ic Bo C ra ol z Regional background G o m il ua bi ta D E l S em om a a l in l va a ic a n dor R E c ep ua . do H Pe r on ru d Large remittance flows Ja u ra ms ai ca H a B iti N oliv ica ia r A r agu ge a nt in a C Pa h il C ra g e os u a ta y R G ica uy Ve a ne na z P a uel Tr na a in m id ad U ru a & gu T o ay b S u ag rin o a Be m liz e 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% % GDP Millions of USD 4
Regional background • Surge in consumer credit 140 Average annual growth 2001 - 2005: +20% Venezuela Argentina 120 Colombia Peru Chile 100 Miles de m illones de USD Mexico 80 60 40 Brazil 20 0 2001 2002 2003 2004 2005 Source: McKinsey (2007) 5
Regional background • Mobile is the fastest-growing ICT in LAC 80 70 Subscribers per 100 inhabitants 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 Mobile s ubs cribers Fixed lines Broadband s ubs cribers Internet us ers Source: ITU (2008) 6
Regional background Argentina Brazil Colombia Mexico Peru Penetration Low-income cell phone users (2007) 70% 53% 89% 37% 60% Low-income owners (2007) 61% 42% 63% 30% 37% 102% 63% 74% 64% 55% Total penetration (2007) 74% 96% 90% 92% 96% Low income (2007) Prepay 73% 80% 83% 89% 87% Total (2007) Cost of the Negative perception (expensive) 18% 54% 21% 38% 35% service 68% 34% 51% 45% 55% Neutral perception 14% 12% 28% 16% 10% Positive perception (cheao) Average expense Low-income - US$ (2007) 11,0 12,0 6,0 16,0 7,0 14,5 15,3 8,1 17,9 10,3 ARPU telecom operators – US$ (2007) Voice ARPU telecom operators – US$ (2007) 11,8 14,1 7,1 15,1 8,9 Elasticity in low- Would stop using cell phone if its cost doubled 9% 8% 16% 23% 9% income users Wouldn’t change use pattern if cost doubled 34% 24% 20% 29% 21% Would increase use if cost halved 83% 84% 78% 83% 82% 37% 42% 47% 30% 68% Would increase use if income doubled 91% 36% 44% 53% 45% SMS use SMS in low- income users Doens’t use because doesn’t know how (over non-users) 37% 38% 34% 39% 53% 7 Source: DIRSI (2007), ITU (2008) and Pyramid Research (2007)
Classifying Mobile Financial Services Services over banking Services over non- stores of value banking stores of value (mobile banking) (mobile wallets) Transformational models Oi Paggo (Brazil)* M-Pesa (Kenya) MTN Banking (South Africa) Tigo Cash (Paraguay) Gcash (Philippines) Wizzit (South Africa) Mobile Money (Jamaica) Smart Money (Philippines) Orange Money (Ivory Coast) Additive models Crandy (USA, France) Nipper (Mexico) Link Celular (Argentina) Obopay (USA) Mobipay (Spain) Pichincha Celular (Ecuador) PayPal Mobile (USA) Banco do Brasil (Brazil) … 8 * Oi Paggo is a credit-based mobile payment system that requires no bank account, but it is not strictly a mobile wallet
Transformational Mobile Financial Services • Main regulatory concerns: – Financial stability & Competition – Agent networks – AML/CFT Top-down – E-money BoP • Main technical concerns: Bottom-up – Mobile bearer technology – Banking core technology – Access to payments systems 9
Environment for Mobile Financial Services BUSINESS CASE PRE-REQUISITES • Promoters & model • Mobile network • Price scheme • Tested technology • Distribution & Cash management • No regulatory • Consumer insight impediments ENABLERS DRIVERS • Agents • AML / CFT AVAILABLE SERVICES • E-money • Top-up • High mobile penetration • Bill payments • Banking • Money transfers & remittances technology • Salaries / subsidies • Literacy • Purchases 10
Key national findings COUNTRY BOLIVIA Financial System Access to formal 30% evatel; 24,3% financial services Banking agents Regulation and operation Entel Móvil; E-money No regulation 47,8% Remittances 8% (over GDP) Mobile telephony Penetration 34,2% Telecel; 27,9% Prepay 85% Sophistication 7,39% 10 Millones MFS M-banking Yes 9 8 M-wallet n.a. 7 •Limited banking technology available at most MFIs Additional 6 •América Móvil and Telefónica not present information 5 4 3 2 1 0 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E Población e s tim ada a Julio de 2008 Núm e ro de abonados ce lulare s 11
Key national findings Otros; 0,3% COUNTRY BRAZIL Oi; 18,9% Financial System Access to formal 43% financial services Vivo; 30,5% Banking agents Regulation and operation E-money No regulation, prepaid cards Remittances 1% (over GDP) TIM ; 25,6% Mobile telephony Penetration 63,1% Prepay 80% Claro; 24,8% Sophistication 7,75% 200 Millones MFS M-banking Yes 180 160 M-wallet Yes (Oi Paggo*) 140 •Brazil was pioneer in regulating banking correspondents and Additional 120 information has achieved a full coverage of municipalities in the country 100 with this scheme. 80 •ANATEL, the telecommunications regulatory body in Brazil, 60 must authorize certain value-added services over telecom 40 networks, as it might be the case with MFS. 20 0 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E Población e s tim ada a Julio de 2008 Núm e ro de abonados ce lulare s 12 * Oi Paggo is a credit-based mobile payment system that requires no bank account, but it is not strictly a mobile wallet
Key national findings COUNTRY ECUADOR A leg ro ; 4 ,8 % Financial System Access to formal 35% financial services M o vist ar; 2 7,0 % Banking agents Regulation and operation E-money No regulation, prepaid cards Remittances 7% (over GDP) Mobile telephony Penetration 75,6% Po rt a Celular (A mérica M o vil); 6 8 ,2 % Prepay 88% Sophistication 15,77% 14 Millones MFS M-banking Yes 12 M-wallet n.a. 10 •Most Ecuadorian migrants live in Spain, where nearly 77% of Additional 8 information them have a bank account. •In Ecuador, HalCash operates through Banco de Guayaquil. 6 This system allows the reception in a mobile phone of a code that allows the recipient to withdraw his/her remittance at an 4 ATM, as long as it has been sent from a Spanish bank 2 account. The recipient does not need such account. 0 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E Población e s tim ada a Julio de 2008 Núm e ro de abonados ce lulare s 13
Key national findings COUNTRY MEXICO Next el; 3 ,2 % Iusacell; 6 ,1% Financial System Access to formal 25% financial services M o vist ar ; 17,8 % Banking agents Regulation and operation E-money No regulation, prepaid cards Remittances 3% (over GDP) Mobile telephony Penetration 64,1% Telcel; 72 ,9 % Prepay 88% Sophistication 15,66% 120 Millones MFS M-banking Yes (inc. Celopago, Nipper) 100 M-wallet n.a. 80 •Mexico alone received in 2007 remittances for 24.000M$, Additional 60 information nearly 50% of all remittance flows in LAC. •Western Union offers the use of a mobile application in 40 Trumpet Mobile terminals as an alternative channel for money transfer services. 20 0 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E Población e s tim ada a Julio de 2008 Núm e ro de abonados ce lulare s 14
Key national findings COUNTRY PERU Next el; 3 ,4 % Financial System Access to formal 25% financial services Banking agents Regulation and operation Claro ; 3 8 ,8 % E-money No regulation, prepaid cards Remittances 3% (over GDP) Mobile telephony Penetration 55,3% Prepay 88% M o vist ar; 57,8% Sophistication 13,86% 35 MFS M-banking Yes Millones 30 M-wallet n.a. 25 •Banking supervisors (Superintendencia de Banca y Seguros) Additional 20 information and the Central Bank have agreed not to consider mobile 15 wallets as deposit taking, but as a mere payments service. 10 5 0 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E Población e s tim ada a Julio de 2008 Núm e ro de abonados ce lulare s 15
Key national findings COUNTRY DOMINICAN REPUBLIC Financial System Access to formal 29% financial services Or ange Dominicana; 36,3% Banking agents No regulation Clar o ( Ant es Ver iz on, Codet el) ; 47,2% E-money No regulation, prepaid cards Remittances 9% (over GDP) Mobile telephony Penetration 56,5% Prepay 85% Cent ennial Dominicana; 6,2% Tr icom; 10,3% Sophistication 5,86% 10 Millones MFS M-banking n.a. 9 8 M-wallet n.a. 7 •Dominican Republic was the only analyzed country in which Additional 6 information no regulation for banking agents was found, nor any additive 5 m-banking models. 4 3 2 1 0 2003A 2004A 2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012E Población e s tim ada a Julio de 2008 Núm e ro de abonados ce lulare s 16
International experiences Country Year Promoter Adoption Distribution Account opening in MTN and Standard Bank MTN MTN (Operator) and 15K clients by April branches. If identity is not confirmed, limited 2005 Standard Bank 2005 functionality. Cash-in in stores and EasyPay Money South network. Africa Account opening with agents (Wizz Kids) and 400 50K clients in less Wizzit 2005 Bank of Athens Dunn stores; cash-in at PostBank, Absa or Bank than 2 years of Athens; cash-out available at stores. 2M registered (April Vodafone - Safaricom Account opening, cash-in and cash-out in 850+ M-Pesa Kenya 2007 2008) over aprox. 4M (Operator) agents and Safaricom stores bank accounts Account opening, cash-in and cash-out in 4900+ Globe Telecom - GXI 500K active users in GCash 2004 official agents (only account opening requires (Operator) urban zones physical presence - KYC) Philippines Smart Communications Account opening requires physical presence in Smart 4M subscribers (900K (Operator) and 5 banks any of hundreds of Smart shops; cash-in available 2003 active) by 2006 (including Banco de at 12000+ associated stores, ATMs (with card) or Money Oro) bank branches 17
Lessons learned 70% • Transformational approach Population with access to formal financial CHI 60% 50% SOU • Partnership COL BRA 40% services ECU PAR BOL ARG 30% DOM VEN PHI PER MEX • Technology: STK 20% 10% KEN • Killer application: Top-up 0% 0 2000 4000 6000 8000 10000 12000 14000 16000 GDP pe r capita (PPP) • Distribution (cash-in/cash-out) 120% 2004 Mobile subscribers per 100 inhabitants 100% 2007 • Regulation 80% 60% 40% • Scale 20% 0% s le a ru . o ia ay il a r a ep la a e bi do as ic ny hi in l iv Pe r ic in e gu om ex R C nt ua Br zu pp Bo Ke Af ra n ge M ol ne Ec a i li h Pa C ic Ar Ph ut Ve in So om D 18
Conclusions: criteria • Low levels of access to financial services • Enablers: – Regulation on banking agents, e-money and/or prepaid cards – High mobile penetration and growth • Drivers: – Importance of remittance flows – Sophistication of cellular market • Other (previous MFS in the country, telecoms regulation, competition…) 19
Conclusions: summary of key national findings Access to financial services Financial Regulation Remittances Mobile Market MFS experiences Population with access Branches/ ATMs/ E‐money / Data ARPU / Lines per Agents %GDP MFS to financial 100K inh. 100K inh. prepaid cards Total ARPU 100 inh. services √ 30% 0,13 4,80 X / X 8% 7,39% 34,2 Bolivia √ 43% 3,05 17,82 X / √ 1% 7,75% 63,1 Oi Paggo Brazil √ 35% 4,38 6,32 X / √ 7% 15,77% 75,6 Hal Cash Ecuador Celopago, Mobipay, √ 25% 4,09 16,63 X / √ 3% 15,66% 64,1 Mexico Nipper, Western Union √ 26% 0,89 5,85 X / √ 3% 13,86% 55,3 Peru Dominican 29% 10,83 15,08 X X / √ 9% 5,86% 56,5 Republic 20
Conclusions: most suitable environments for MFS • Regulation on banking agents, existing • Ecuador prepaid cards • High mobile penetration and growth • Mexico • High sophistication of mobile market • Peru • Important remittance flows • Brazil: role of ANATEL, existing e-payments (cards) infrastructure, taxation • Bolivia: low mobile penetration (competition?), challenging banking infrastructure (particularly in MFIs) • Dominican Republic: No agents, lowest mobile sophistication, no MFS 21
Recommendations Addressee Goal Recommendation Risks and issues Donors To choose the country To assess the environment in each Promoting initiatives based with the greater potential of the countries, prioritizing those on excessively favorable to develop initiatives with in which, given the relevant pre- environments, making them regional impact. requisites, MFS enablers and unsuitable for export to other drivers are also found. countries. To create a positive To collaborate with regulators and Creating national regulations environment for the authorities in order to define an with diverging national development of MFS. open legal framework which interpretations provides certainty and harmonization at a regional level. To support successful To apply lessons learned in Failing to adapt international models
M-Banking: Opportunities and barriers for the development of Mobile Financial Services in Latin America and the Caribbean Washington DC ...
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