The growth of the mobile channel in Latin America and the Caribbean

Louis Peake

Press Officer at Compass Plus

Views 627

The growth of the mobile channel in Latin America and the Caribbean

13.09.2017 11:15 am

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.

Continued success

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. 

Latest blogs

Dominico Scaffidi Volante Technologies

Liquidity fragmentation: enemy of global treasuries

There is a lot of change going on in the cash management industry. Payment modernization, increased regulation and market and consumer 24/7 expectations are seen as four catalysts causing a distinct structural shift. Dynamism and forecasting of cash Read more »

Peter Shackleton Upgrade Pack

Banking and customer retention – why trust is no longer enough

Banking and customer retention in 2019 – why trust is no longer enough. Fintech had a moment in 2018. The UK fintech scene overtook the US in terms of investment and cemented its position at the front of the peloton in Europe. In 2018 valuations Read more »

Jukka Yliuntinen Mobey Forum, Giesecke+Devrient Mobile Security

An ID-eal position: Banks and trusted digital identity

The rapid pace of digital transformation has left many industries scrambling to find secure, convenient ways of establishing identity for digital services.The identity ecosystem has become fragmented and complex, with too many stop-gap solutions Read more »

Duena Blomstrom N/A

Why A Culture Of “Us Versus Them” Is Deadly

Employees today are by and large unhappy at work. Survey after survey shows mistrust, fear and stagnation reigning supreme. Read more »

Jerry Norton CGI

Extending the bank: Key drivers, technologies and steps

What does it mean to extend the bank? Traditionally, banks have manufactured, distributed and managed all of their own products and services. The concept of extend describes how this traditional model is changing as the value chain becomes unbundled Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App