The past decade has been a period of significant financial transition for the Latin America and Caribbean region (LAC). LAC has such variety across its markets – rural and urban, wealthy and poor, connected and remote – that the payments ecosystems differ drastically between countries. Born out of this diverse landscape and the need for financial inclusion, mobile is fast becoming a key method of transferring and spending money.
The GSMA found that following the burst of the credit bubble, LAC saw the number of mobile money accounts grow by 50 per cent between December 2013 and December 2014. In 2015, nearly two-thirds of LAC countries had at least one active mobile money service, with 37 operating across 19 markets; holding close to 15 million registered accounts.
Access to mobile money services has proved particularly successful in markets where there is a lower GDP and a less developed financial system, such as Bolivia and El Salvador, offering more convenient P2P and bill payments, as well as international remittances. In higher GDP nations where there is access to more sophisticated banking, Brazil, Costa Rica, Mexico and Panama, for example, growing mobile money has actually been a more challenging proposition due to the stability of traditional payment methods. Habitual behaviour is hard to break; however, the popularity of the mobile to both bank and make payments is increasing at a steady rate thanks to partnership models between operators, FIs, retailers and others using the existing infrastructure to drive adoption.
Improving levels of financial inclusion
The unbanked and underbanked populations in LAC remain high by global standards at 50 per cent in 2015. According to the Global Financial Inclusion Database, the nation-by-nation figures for the number of adults that remain unbanked range from 35 per cent in Brazil, Jamaica and Costa Rica to a staggering 80 per cent of adults in Haiti and Nicaragua. But, with the assistance of the mobile device, this is already changing.
El Salvador is a prime example of the mobile’s success in closing the financial access gap. With just 14 per cent of adults with formal bank accounts in 2011, the higher-than-average mobile money account rate in the country contributed significantly, growing this figure to 37 per cent by 2014; – largely due to the ability to make bill payments and international remittances. Remittances have been key in driving the adoption of the mobile as a payment method, in 2016 alone, the flow of remittances to Latin America and the Caribbean surpassed US $70 billion – up eight per cent on the previous year. It is hard to argue that 2017’s figures will show anything other than continued growth as the rate of migration away from, and throughout the region continues, coupled with the adoption of the mobile device.
Bringing mobile payments to the mainstream
Aside from the need for international remittances, it is clear that the LAC market has a growing demand for the mobile channel. RFI Group data shows that 76 per cent of Mexicans currently use mobile banking either online or via an app, with 88 per cent engaging with it on a frequent basis. This figure increases when looking at the country’s millennials, with 82 per cent actively using mobile banking demonstrating that the country has a whole generation willing to adopt cutting-edge banking technology. This trend has not gone unnoticed by mobile payment providers across the region, who are looking to capitalise on the millennial-rich population to provide mobile financial services across LAC.
Mobile adoption hasn’t just been driven by millennials and P2P payments, however, there are plenty of localised case studies utilising the channel in varying ways; a good example is SugaPay in Antigua. SugaPay is an alternative payment method whereby a payment card is linked to the user’s mobile phone. It was launched as the official payment method for the 2013 Caribbean Premier League (CPL) cricket tournament and has continued to partner with sporting events that draw people to the island as one of its platforms for growth. SugaPay is also working with local merchants to help them accept cashless payments and to expand its reach across the island with local promotions.
To maintain their success, mobile money providers and FIs across the region are starting to offer an expanded range of products and services beyond simple mobile banking, bill payments and international remittances to improve customer satisfaction, increase their potential customer base and, ultimately, their bottom line. In relatively wealthier markets, the services on offer are becoming increasingly customer-focused, with continued fair competition between bank and non-bank mobile money players essential to avoiding escalating prices for the consumer.
Across the region as a whole, it is certain that the mobile channel has played a major role in shaping the financial landscape in both high and low GDP nations thanks to the wide array of benefits on offer and the sheer mobility of the device. While overall transaction volumes and values are still small relative to other regions, customer activity rates in LAC are higher than the global average, making this market one to watch in the coming years.