In Latin America, 60 percent of the population lacks access to financial services, equivalent to approximately 250 million people. However, mobile phone penetration is between 90 and 100 percent. In some countries, such as Colombia, penetration is 105 percent. This indicates that most people have a mobile device and some, even two. What role do mobile wallets and payment platforms play in financial inclusion?
This was the central question of the panel: E-wallets and payment platforms for the Bottom of the Pyramid (BOP) held during the BASE III Forum celebrated by the Inter-American Development Bank‘s Opportunities for the Majority in Mexico City from June 29 to July 1st. Payment platforms and e-wallets can offer financial services in an efficient, simplified and safe manner by reducing the costs associated with handling cash. Here are four ways to make the most of this business model:
- Create an ecosystem that engages several actors. Financial institutions, governments, large and small businesses and others promote the use of electronic payments. Users must have access to a technology platform that is widely accepted in commercial establishments and, preferably, that is inter-operable. Peru, for example, under the leadership of the Association of Banks will launch a mobile payments platform that can be used by all financial institutions , mobile phone operators, credit card issuers and electronic money issuers in the country. The “Peru Model” allows all financial intermediaries in the country to participate without limitations in the platform.
- Partnerships are key. Partnerships are essential to ensure that all players in the ecosystem win. The Qiubo model, for example, leverages the extensive distribution network of Grupo Bimbo, which owns the commercial arm and point of contact to customers. Bimbo serves approximately 850,000 microretailers in Mexico that Qiubo aims to reach with the financial services provided through its mobile platform. Quibo has the support of major strategic partners such as Visa and Banamex. Another example is Daviplata which partnered with the government of Colombia to facilitate the transfer of subsidies and with large companies that are already using the platform to receive payments from the micro entrepreneurs that belong to its distribution chain. Currently, Daviplata has 2,500,000 clients.
- A big part of the success of the business model is to understand the end user and to focus on their specific needs. One of the main barriers of the adoption of mobile payment platform is the lack of knowledge about the benefits they can bring. It is important that companies take into account the views of end-users (micro entrepreneurs, small companies, subsidies recipients, etc.) and provide a service in an affordable way. In the case of Daviplata, most services to the end-users (utilities payments, receptions of subsidies, mobile phones top-ups, among others) are free; however, defining the payments scheme was one of the biggest challenges of the business. Commissions in Daviplata are paid by the utility companies that receive payments from their users, by the government that transfers subsidies, by the telecom companies that sell air minutes, and by the big companies that receive payments from distributors. Additionally, for the end-user, these platforms must be user-friendly. In Colombia, simplified savings accounts already exist, allowing customers to open a savings account through their cell phones or a bank correspondent, without having to travel to a branch office.
- Scale is critical to financial sustainability. Mobile payments businesses require scale. Companies in the market must achieve a critical mass of customers that will adopt and use regularly the services offered through the platform. Informing and educating customers is a major challenge that requires face-time in the communities. Companies succeed when they launch information campaigns to personally educate potential customers. Moreover, ease of language and user-friendly processes are key. Davivienda, for example, has simplified the banking language in the mobile application of Daviplata. Instead of doing “financial transactions,” users can “send money”, “receive money”, “make payments”, etc.
Moderated by Sergio Navajas, Senior Specialist at MIF, this panel was attended by Hortensia Contreras, Vicepresident of Electronic Services of Grupo Bimbo (Mexico), Margarita Henao, Vicepresident of personal banking products of Davivienda (Colombia), Miguel Arce, Digital payments commercial manager of the Peru Association of Banks (Peru) and David Tuesta, chief economist of BBVA Financial Inclusion Section (Spain).
Do you believe a world without cash is in our future?