Cash is still king across most of Latin America. A lack of trust in banks and a low rate of financial inclusion, largely stemming from the region’s history of economic volatility and uncertainty, mean that 85 percent of transactions are still cash-based.
The tide is beginning to turn, however. Acknowledging the potential of mobile as a channel for managing money in delivering financial services to the ‘unbanked’ population and boosting their countries’ economies, central governments across the region have either adopted or are working towards an enabling regulatory framework.
By embracing this, and creating mobile wallets, banking apps and payment platforms, the region’s banks and mobile operators are slowly beginning to lure customers away from cash and toward digital payment methods. According to the GSMA, the number of registered and active mobile money customers in Latin America is growing steadily, along with the volume and value of transactions. 20 million new mobile money accounts were created between 2014 and 2017, for example, twice as many as were created by traditional financial institutions over the same period. What’s more, it has been estimated that more than a quarter (27.5%) of ecommerce sales in the region were made via mobile, to the value of more than US$14 billion.
Colombia is leading the way in this shift towards mobile money. With two in five (19%) of its citizens using mobile wallets, the country ranks joint fifth globally with Australia; above even the USA and Singapore in terms of embracing the technology. At the same time, however, it’s worth noting that less than half (46%) of the country’s population has a formal bank account, considerably lower than the overall average for Latin America (54%).
There’s clearly an appetite for mobile money, then, but it’s also clear that there is more operators can do to open this up beyond traditional financial institutions, and drive adoption rates among their subscribers.
Everything in the right place
With mobile subscriber penetration levels at 69 percent in 2017, Colombia is one of the region’s major mobile markets. It certainly has all the right ingredients in place to effect the necessary change. Significant investments are being made in the country’s mobile infrastructure following the 2012 launch of the Vive Digital government initiative to help bridge the country’s digital divide. Its three major network operators have extended their LTE, VoLTE and mobile broadband services, for example, and trials of 5G technology are taking place ahead of a wider rollout over the next couple of years. The improved mobile internet access afforded by these developments, in conjunction with less expensive data plans and growing smartphone adoption, all make for fertile ground when it comes to encouraging the adoption of mobile payment methods, and it’s crucial that operators make the most of this.
They must be aware, however, that doing so will be no easy ride. The BBVA Wallet mobile app, for example, might be successful at attracting users, but it has yet to generate any significant volume. Likewise, while around a third of US smartphone owners have enrolled in Apple Pay, Samsung Pay, and Android Pay, only 8 percent, 6 percent and 3 percent respectively use them at least once a week. Consumers in Latin America, in common with those across the rest of the world, increasingly expect convenience in everything they do. Operators must therefore ensure they offer a frictionless mobile payment experience if they are to successfully attract and retain customers.
Key to this is ensuring that their customers are always connected, by enabling all means of digital payment, such as digital wallets and debit/credit cards. With each of these methods available as an option it becomes far easier for customers to top-up their voice and data bundles, wherever they are, whenever they choose. Not only does it ease the burden on the region’s subscribers, it gives the operators far greater control of the subscriber Quality of Experience (QoE).
Connected and happy
It comes as no surprise that the greatest opportunity to shift from a cash-based to an electronic payments economy exists in emerging markets. In Colombia, the finance ministry and the central bank increasingly work with industry and civil society to phase out cash. Almost three in five of its population use a smartphone and demonstrate a great deal more interest than some of their neighbours in mobile payment initiatives. We could even see the market bypass the traditional route of increased card usage in favour of digital wallets instead.
With relaxed regulations allowing them to create intelligent digital payment solutions that meet the expectations of their subscribers, keeping them connected and happy by enabling them to carry out transactions from wherever they are, whenever they choose, the country’s mobile operators can convert this interest into adoption. In a market in which top-ups are traditionally purchased from retail outlets, in cash, this represents a significant step towards boosting the adoption of digital payment methods. Not only will this unlock a new and lucrative revenue stream, but it will also encourage greater financial inclusivity among the population, help bolster the country’s economy and be a leading light in Latin America.