LandscapeofVirtualMoneyinLatinAmerica
Trends,Opportunities, Risks
January2016
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Tellingthestory:Trendsinvirtualmoney
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ThecaseforfinancialinclusionandmobilemoneyGlobally, themobile phone isconsidered atoolforfinancialinclusion, butthepoolofLatAmunbankedmobile phoneusersmaybesmallerthanonceimagined
MarketBanked
population (mn)Creditordebit card
holders (mn)Mobilephone users
(mn)Unbankedmobilephone users(mn)
Uncardedmobilephone users(mn)
Brazil 108 94 147 39 53
Mexico 35 24 83 48 59
Colombia 14 11 34 20 23
Peru 6 5 21 15 16
Chile 9 8 13 4 5
Argentina 16 14 30 14 16
LatinAmerica 220 173 396 176 223
Sources:TheWorldBank,eMarketer,MasterCard,GSMA
Financialinclusiondata,2014
According to theGSMA,mobilemoneyusesacellphonetomaketransfersandpayments,isgearedtoward theunderbanked andmustmeetthe followingcriteria:1. Offeratleastoneofthefollowingservices:
§ Domesticorinternationalremittances§ Mobilepayments,includingutilitybillpayments
2. Bebasedonanetworkoftransactionalpointsoutsidebankbranches
§ Socialbenefitspayouts§ Paymentsatmerchants
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EnthusiasmformobilemoneyhassurgedinrecentyearsSpearheadedbythetelcos, investmentinmobilemoneyforfinancial inclusion hasremainedstrong
§ Therearecurrently37livemobilemoneyservicesinLatinAmericaandtheCaribbean.§ LatinAmericaexperienced50%growthinthenumberofmobilemoneyusersin2014,thehighestgrowthrateofany
world region.§ Sixcountrieshavemobilemoneyregulatoryframeworksandseveralothersarepursuingfinancialinclusion legislation
LatAmmobilemoneylaunches,2010-2015
2010
TchoTcho– HaitimPeso –NicaraguaTigoMoney – HondurasCuentaMóvil – Chile
2012
MiBillerteraMóvil– ArgentinaBilleteraMóvil– PeruTransfer – MexicoPadeMobile –MexicoTransferAval – Colombia
OrangemPeso– DominicanRepublicMovilCash– PanamaTuDineroMóvil– PeruPlataMóvil - Colombia
2011
Daviplata – ColombiaMovilwayeWallet– VenezuelaBancamigo – GuatemalaTigoMoney- Guatemala
2013
AhorroalaMano– ColombiaMeuDinheiro– BrazilZuum – BrazilEnvíosPersonal– ParaguayLajancash – Haiti
2014 2015
OlhaConta– BrazilTIMMultibankCaixa– BrazilDineroElectrónico– EcuadorBIM – PeruVIVA Solutions– Bolivia
Sources:GSMA,GSMAMobileMoneyDeploymentTracker
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Despiteconcertedefforts,MMhasnotyetreachedscaleConsiderable challengesremainforMMtobringvaluetobothusersandoperators
§ Despiteheavyinvestmentbytheregion’sbiggestplayers,mobilemoneyhasstillnotreachedscaleafter8+yearsinoperation.
§ Operatorsfacesignificantchallengesinkeepinguseraccountsactiveonceopened.
§ MostMMserviceshave<5%penetrationoftotalmobilesubscriptions.§ MMismostsuccessfulinsmallcountriessuchasHaiti,CentralAmerica
andParaguay.§ MMhasgainedalmostzerotraction inlargeeconomiesBrazilandMexico
50% 23% 14% 11% 2%
Airtimetop-up P2Ptransfer Bulkdisbursement Bill payment Merchantpayment
Transactiondiversificationremainslow,with73%oftransactionvolumeconcentrated inairtimetop-upsandP2Ppayments.
Mobilemoneypenetration,yearend2014
Scaledservices,yearend2014
Mobilemoneytransactionbreakdown,%oftotal volumetransacted,yearend2014
LatAmadultpopulation
TotalMMpenetration
460 mn15mn
RegisteredMMusers
ActiveMMusers*
6mn
3.3%
Only3outof37serviceshaveachieved1million+users
Sources:GSMA,CenterforFinancialInclusion,AMIinterviewsandanalysis*Active inthepast90days
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SmartphoneusersarealargerandmoreviableopportunityAmongLatAm’ssixlargestmarkets,smartphoneusersrepresent77%moreincomethanfeaturephoneusersand33%fewerpeople.
Market Incomecontrolledbytop40%(smartphone users),2015,bnUSD
Incomecontrolledbybottom60%(featurephone users),2015,bnUSD
Brazil $1,188 $612
Mexico $720 $442
Colombia $178 $96
Peru $101 $79
Chile $157 $83
Argentina $329 $250
Total $2,673 $1,562
30%
40%
50%
60%
70%
2015 2016 2017 2018 2019
ChileColombiaMexicoArgentinaLatinAmericaBrazilPeru
Smartphonepenetration,2015-2019CAGR:12%
Smartphonepenetration,2015-2019
Sources:TheWorldBank,eMarketer
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§ Launchofcard-on-filedigitalwallets§ Partnershipwithmerchantstodevelopmobileapps
ThemarketdemonstratesarecommitmenttotheaffluentBanks,cardnetworksandtechcompaniesareadjustingtheirfocus toprioritizesmartphoneholders
§ In2015,marketplayersinvestedinA)contactlessmobilepaymentsbydevelopingdigitalwalletsandnon-NFCtechnology;andB)enablingm-commercethroughcard-on-filewallets.
§ Mobilemoneyisstillapriorityincountrieswherethereisgovernmentsupportandmarketcollaboration.
Productfocusofmarketplayers,2015
Mostagile
Leastagile
Cardnetworks
§ Enablingcontactlessmobilepayments(NFCandnon-NFC)§ Developmentofwhitelabelmobilewallets§ Expansionofe-commercegatewayservices§ Developmentofloyaltyprogramsforbanksandmerchants§ Enablingintegratedin-apppayments
§ Partnershipstoenablecompanioncardmobilemoneyservices§ Enablingin-apppayments
§ Developmentofdigitalwalletsfore-commerceandphysicalpurchases§ Optimizingonlinebankingplatformsformobiledevices
Technologycompanies
Telcos
Banks
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Whatopportunitiesaremarketplayerspursuing?
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Product Country Launchdate Involvedentities Howitworks
BilleteraMóvil Colombia Q32015 Bancolombia,MasterCard ViaQRcode
AvalPay Colombia Q32015 GrupoAval, CredibanCoYellowPepper ViaQRcode
Colombia Q4 2015 BancoDavivienda,Citibank,CredibanCo, YellowPepper Sixdigitone-timepasscodes
YepexWallet Mexico 2015 YellowPepper, eGlobal,Banamex
NFC, BLE,QRcodes,sixdigitone-timepasscodes
BBVAWallet Mexico Q22015 BBVABancomer NFC, HostCardSimulation
PayClub Ecuador Q42015DinersClubofEcuador,
BancoPichincha,YellowPepper
Sixdigitone-timepasscodes
Samsung Pay Mexico,Colombia 2016 Samsung, Loopay MagneticSecureTransmission
ContactlessmobilepaymentsWithservices fortheunbanked stagnatedandunprofitable,mobile financialservices forsmartphoneholders areontherise
“Providingbankingservicestotheunbankedwasn'tpayingenoughforustosurvive,soforthetimebeingwe'veleftthatmarket.”- YellowPepper
Recentandupcominglaunches
§ 2015sawthelaunchofseveralmobilewalletsthatbuildonexistinginfrastructure(non-NFC),whichacceleratesrolloutandmakesitaffordabletoconsumersandmerchants.
§ OnlyBrazilhaswidespreadpenetrationofNFCterminals,andthenumberofNFCenabledsmartphones(mainlytheiPhone6)intheregionisstilllimited.
Sources:ElectronicPaymentsInternational
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M-commercedigitalwalletsWiththeonsetofm-commerce,companies areinvestingintechnologytocapturemarketshare
$1$3$4$5
$20
$47
$0.1$0.3$0.7$0.8$4$8
PeruColombiaMexicoArgentinaBrazilLatAm
E-commerce M-commerce
24%
60%
LatinAmerica
E-commerce
M-commerce
§ Lateonsetofmobilecommerceduetocustomerfearoffraud,clumsymobilesitesandlimitedcreditcardpenetrationhasdeterredpaymentcompaniesfromtakingm-commerceseriously.
§ Butmaturinginfrastructureandtechnology issettingthestageforhighm-commercegrowth.
§ Banksandcardnetworksarenowsettingtheirsightsonthedevelopmentandlaunchofm-commercedigitalwallets:
Digitalcommerce*,2015,USDbillions
Digitalcommercegrowth,2015-2016USDbillions
In2015,VisalaunchedVisaCheckout inColombiaandMexico.
In2015,VisaNetinPerupartneredwithEntelandothermerchantstodevelopcard-on-filemobileapps
Since2013, severaldigitalwalletshavelaunchedinBrazil,including:
Atakus
Sources:eMarketer,InternetRetailer, interviews,AMIanalysis
*Excludestravelandeventtickets
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LookingaheadProvidershaveformidablechallengestoovercomeforsmartphone-based mobile paymentstotakeoff
Contactlessmobilepayments M-commercedigitalwallets
Factorsforsuccess
§ Rapidgrowth ofsmartphonepenetration
§ Mostnewapplicationsbuildonexistinginfrastructure
§ Rapidgrowth ofsmartphonepenetration
§ Growingtimeconstraintsofthemiddleandupperclasses
Opportunities
§ Developmentofloyaltyprograms§ Developmentofprepaidcardsinlieuof
creditcards§ Cashondeliverye-commerce/phone
sales
§ Developmentofprepaidcardsfore-commerce
§ Rapidgrowthofemergingm-commercesegments,suchastaxis,telecom,andentertainment
Potential roadblocks § Lowcreditcardpenetration§ Are mobilepaymentsmoreconvenient
thantraditionalcreditcardpayments?
§ Securityconcerns§ Lowpenetrationofm-commerce sites
amongmerchants§ Lowcreditcardpenetration
Workstilltobedone
§ Intensivemarketingcampaignsbywalletproviderstoaffectachangeinbehavioramongconsumers
§ Continualmerchanttraining
§ Coordination betweenbanks,paymentgateways,processorsandmerchantstoimprovee-commerceconversionandauthorizationrates
§ Intensiveconsumereducationcampaignstoencouragewalletadoption
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Newpotentialformobilemoney
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RegionalOverviewMobilemoneyusageandgrowthpotentialvarieswidelybymarket
Mobilematurityin2016
Leadersinmobilemoneypenetration
Significantmobilemoneygrowthpotential
Limitedmobilemoneygrowthpotential
Group1:Leadersinmobilemoneypenetration
Haiti,ElSalvador,Honduras,Bolivia,
Paraguay
Mobilemoneyhaspenetrated7%+ofallmobilephonesubscriptions
Group2:Significantmobilemoneygrowthpotential
Brazil,Mexico,Colombia,Peru,
Ecuador,Guatemala
Large correspondentbanknetworks,favorablelegislation,highpenetrationofmobilephones, largeremittancemarket
Group3:Limitedmobilemoneygrowthpotential
Nicaragua,CostaRica,Panama,
Venezuela,Chile,Argentina,TheCaribbean
(exceptHaiti)
Limited/nocorrespondent banknetwork,unfavorablelegislation,nomobilemoneytraction
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Aselectionofliveservicesin2016Inmostcases,mobilemoneypenetrationremainsdisappointing
Country Service Partners Yearlaunched
#ofusers Mobilesubscriptions(2013)
Penetration
Bolivia TigoMoney Tigo 2012 700,000 (2014) 10,425,704 7%
Brazil MeuDinheiro Claro, Bradesco 2013 271,099,799
Brazil TIMMultibankCaixa TIM,MultibankCaixa,MasterCard 2015 271,099,799
Brazil Zuum Vivo,MasterCard 2013 384,000 (2015) 271,099,799 0.1%
Colombia Ahorro alaMano Claro, Tigo,BanColombia 2013 280,000 (2015) 50,295,114 1%
Colombia DaviPlata Tigo,Claro,DAVIVIENDA,Redeban 2011 2,000,000 (2014) 50,295,114 4%
Ecuador MobileMoneyPlatform Movistar,Claro,BancoCentral deEcuador 2015 45,670(2015) 17,541,754 0.3%
Guatemala TigoMoney Tigo 2011 250,000 21,716,357 1%
Haiti Tcho Tcho Digicel, Scotiabank,YellowPepper 2010 1,000,000 +(2011) 7,160,200 15%
Mexico Transfer Telcel,Banamex, Inbursa 2012 105,005,729
Paraguay TigoMoney Tigo,BancoContinental, ItaúUnibanco, VisionBanco 2008 1,200,000 (2015) 7,053,297 17%
Peru TuDineroMovil Movistar,MasterCard,NovoPayment 2014 29,793,297
Sources:GSMAMMUDeploymentTracker,UNData,Tigo,Bancolombia,Exponews,BancoCentraldeEcuador,Agrobanco,Telesemana,
Telesintese,Elsalvador.com,interviews
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Stepstocreateinteroperability
Theneedforinteroperability
Interoperability:EssentialtoscalingmobilemoneySuccess ofMMhasstalledduetoclosed-loop infrastructure.AregionaltrendtowardinteroperabilitymakesMMmoreviable.
§ Almostallmobilemoneyservicesintheregionare closed-loop,functionalacrossonlyoneMNOnetwork
§ UserscannotsendorreceivemoneyfromauseronadifferentMNOnetwork
§ Closed-loopseverelyreducesplatforms’utilitytousers
§ Non-interoperabilityisnotanobstaclewhenoneMNOhasmajoritymarketshare.
§ Whenamobilemoneyusercaninteractwithpeersandmerchantsonanymobilenetwork,theplatform’spotentialincreasesexponentially.
§ Whenmobilemoneycanbeusedanywhereforanything,itbecomesamoreviablereplacementforcash
“Mobilemoneywillonlybesuccessfulifpeopleconsideritto
beequivalenttocash.Fullinteroperabilityacrossbanksand
telcosmakesthispossible.”
–PagosDigitalesPeruanos
1.Anenablingmobilemoneylegalframeworkmustbeinplacetoa)incentcompaniestoissuemobilemoneyandb)protectconsumers.• CountrieswithMMregulatory
frameworkincludePeru,Bolivia,Paraguay,Brazil,NicaraguaandGuyana.
2.Alargeagentnetworkmustbeinplacetoa)maximizeMMutilityandb)evangelizeMMtoconsumers.
3.Awell-positionedindustryorganizationmusttakeastrongleadershiproletoorchestrateinteroperability.
Country #ofbankcorrespondents
Brazil 375,000
Colombia 42,000
Peru 30,000
Mexico ~30,000
Closedloopservices
Sources:GSMA.Pagos DigitalesPeruanos,BloombergBusinessWeek,FundacionCapital,CAF,interviews
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Mobilemoneycasestudy:Peru’sBIMPeruisrollingoutitsmuchanticipated,fully interoperablemobilemoneyplatform
APeruvianmobilemoneylaunchedinFebruary2016,enablingbanksandnon-bankentitiestoissuemobilemoney.
• Salarypayments• Politicalcampaigncontributions
• Integrationwithe-commercegateways• Socialbenefitpayouts
Sources:Gestión,PagosDigitalesPeruanos,interviews
WhatisBIM?
§ Chargeledby thePeruvianBankAssociation(ASBANC)§ Interoperable acrossthreetelcosand33financialinstitutions.Thefirstintheworldofitskind.§ Currentlyoperatinginpilotstagewith3,000users§ Issupportedbyanetworkof40,000+bankandnon-bankcorrespondents§ SoftwaredevelopedbyEricsson§ Paidforandsubsidizedbyparticipatingbanksandtelcos
BIMwill berolledoutinthreephases:
1PHASE Cash-in/cash-out,P2Ptransfers
andmobiletops-upswillbeenabled(Q12016) 2
PHASE BIMaccountswillbeinteroperablewithtraditionalbankaccounts,andmerchantpaymentsandbillpaywillbeenabled(~Q32016)
3PHASE Integrationwithpublic
transportation,B2Bapplications,internationalremittances(~Q12017)Inlate2016,BIMwillreleaseanRFPforthedevelopmentofaBIMsmartphoneapp.
Potentialfutureapplications
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BIMBestPracticesAsolid commitmenttofinancialinclusion andinspiring leadershiphasmadeBIMpossible
KeysuccessfactorsforthePeruvianBankAssociation:§ Progressivementality witheyesonthefuture§ Fearofcompetition fromMNOsandofbecoming
obsolete§ Exceptional leadershipwithanemphasis on
financial inclusion
§ Pressurefromparticipatingbanks§ Fearofapoorreputationfornotprioritizing
financial inclusion§ Acollaborativecultureamongbanksandtelcos§ Patience andlong-termcommitment fromall
involved
Willitsucceed?– Stillhighlyspeculative,butBIMhasseveralfactorsin itsfavor:• Oneconsistentmessageamongvariousentitieswill
facilitateuserregistration,educationanduse.• Alargeagentnetworkisalreadyinplace.
PotentialPainPoints• BIMisnotfree.The$0.15chargetoP2Pmayseem
steeptolow-incomeusers.• Itslow-techapplicationisuncomfortablefor
smartphoneholdersandmaydeterthemid- high-levelincomeusers
Sources:Gestión,ASBANC,interviews,AMIanalysis
Interoperability–Howdidtheydoit?
Long-termcommitment
§ AllfeerevenuewillflowtoPagosDigitalesPeruanos(companycreatedtomanage BIM)tocoverthecostoftheplatform.Bankswillnotearnfeerevenueuntiltheplatformreachesscale, infive+years
§ Banksunderstandthattherealopportunityliesineventualcross-sellingofpaymentcards, loansandotherbankingproductstoBIMusers.
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OpportunitiesgoingforwardBankshaveexcitingopportunities tocross-sell productstoMMusersbutfaceincreasedcompetition
Predictedchanges Potential winners Risks forincumbents
More mobilemoneyapplicationswillbecomeavailable
Consumers,merchants,telcos,banks
IfMM replacescardtransactions,cardnetworksandbankswillloseinterchangeandfeerevenue.
Non-bankentities willplugintoMMnetworks,increasingcompetitiontohouseMMaccountsandgainaccesstouserdata
Consumers,non-bankfinancialentities,technologycompanies
Banks willgoheadtoheadwithincomingplayersvyingformobilemoneyaccountsanduserdata.
Market playerswillhavecross-sellingopportunities
Banks,cardnetworks,techcompanies,telcos
New players,likelyagiletechcompanies,willbeginofferingcompetingproducts, i.e.companioncards,loans.
Costs tomerchantswillfall Merchants,consumersIfacceptingMMismoreconvenientandcosteffectiveformerchantsthancards,cardpayments coulddecline.
Correspondent banknetworkswillexpandoutsideurbanareas
Banks,correspondentbankadministrators,acquirers,cardnetworks
Expansionwillbecostlyforbanks.Cardnetworksmaybeexcluded fromtheprocess.
UnderinteroperableMMnetworks,newopportunitiesandrisksarise
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Conclusion
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Conclusions:Alongroadahead,fullofpotential
Providing financialservicestotheunbanked isacostlyendeavorrequiringacollectiveeffort.
Newinvestmentinmobilepaymentshasflowedawayfromtheunbankedtomiddle-class andaffluentsmartphoneusers.
Interoperabilityandbuilding onexistingpaymentinfrastructurearekeyfactorsforsuccess.
MobilepaymentsinLatinAmericaarestillemergent,nodefinitivemarketleaders.Thereisamplespacefornewplayerentry,productexplorationandinnovation.
Asfirst-to-marketplayersdothehardworkoflayinggroundwork andeducatingconsumers,newplayerswillenterthemarket.Competitionwillbecomeincreasinglyfierce.
Smartphone-based P2PpaymentshavenotyetarrivedinLatinAmerica.Theregioncouldthereforerepresenta)terrainripeforlocalinnovation; orb)thenextfrontierforestablishedP2Ppaymentproviders (Venmo, FacebookMessenger).
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AboutAMI
AMIisLatinAmerica’sleadingindependentmarketintelligence consultancy
Ourfoundingpartners helpedpioneerthefieldofmarketintelligence inLatinAmerica
Ourconsultants haveadvisedover½oftheregion’s100largeststrategic investorsoveraspanoftwodecades
AMIconsultantshaveconducted closeto2,000clientengagementsinLatinAmericasince1993
Ourconsultants haveworkedineverymarketinLatinAmerica
Ourholistic approachtomarketintelligence isunique.Wecombine marketresearch, competitive intelligence,political analysisandeconomic forecasting inour studies.
Fewothers dothesameinLatinAmericaLindsayLehr,SeniorDirector+1(305)[email protected]