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The Latin American banking industry

is acing a complicated challenge. In

the last decade and a hal, which has

included various crises, liberalization

and capitalization, the fnancial systems

in the region have consolidated and inthe process they were able to separate

out the best o the market. Their road

to growth is going to have to involve

serving the medium-low income public

who orm up the majority in the

region. This is not merely a commercial

objective. Both governments and

international organizations are also

interested in promoting access to

banking serv ices in the region as a goal

o social development.

However, this has not been an easy task. The

traditional banking services models are not

well adapted to the eatures o this market,

which is highly dispersed and is also closely

linked to the inormal economy in a good

number o the countries in the region.

Nevertheless, this is not an impossible

task. Some solutions are starting to be

used in the region such as mobile banking,

which has been proven successul in other

parts o the world, like Arica, and the use

o banking agents to multiply the numbero bank service centers without the need

to expand the network o branches. The

combination o these two models, which

produces a orm o branchless banking,

is undoubtedly a much more powerul

ormula than is actually being used in

some countries already.

Nonetheless, these alternatives are not ree

rom limitations. Outdated regulations and

cultural dierences between the dierent

industries are two o the most noteworthy

problems. In this report we will examine

the potential that these models oer

the Latin American banking industry to

expand business into lower income sectors

o the population. We will look at certain

cases implemented and we will ocus on

the barriers and opportunities that are

presently being aced.

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May 2010

EXECUTIVE SUMMARYthismonthsseries:

The road towardspopular banking

Mobile penetration vs fnancial penetration 2009

Source: BNamericas, based on data from regulatory entities

150%

120%

90%

60%

30%

0

Mobile penetration

Financial penetration

Arge

ntina

Brazil

Chile

Colom

bia

Ecua

dor

Mexico

Peru

Urug

uay

The current situationA variety o actors relatedmostly to supply and regulationexplain why the majority opeople in Latin America donot have access to fnancialservices.

Branchless bankingMobile telephony hasundergone explosive

development in Latin America,and telecommunicationscompanies broad base ousers creates an interestingopportunity or both mobileoperators and the bankingsector.

Stumbling blockEven with so much market ormobile banking, this modelhas not been developed inthe region and in the area oregulation we fnd one o themajor stumbling blocks or thisto take o.

Winning formulaThe real task in the regionis combining the provisiono fnancial services via cellphones with a network obanking agents.

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