mobile financial services

Those who follow issues and trends in financial inclusion are already very aware of the important role that mobile phones play in reducing global poverty. GSMA, a global industry association representing nearly 800 mobile operators worldwide, released a report in May 2015 showing that the fastest growth in mobile financial services in the world is taking place in Latin America.

The numbers are impressive: there are currently 37 mobile money services operating the in 19 countries in the region, with nearly 15 million registered mobile money accounts. And at the end of 2014, more than 25 percent of all mobile money transactions in Latin America were the result of third-party transactions like bill payments and merchant payments, over four times more than in East Africa, known as the home of the world’s most successful mobile money deployments.

Latin American Financial Inclusion: One Size Fits All?

When looking at the Latin American market as a whole, it becomes quickly apparent that there is no single approach to building financial inclusion that will be effective in each country. Although there is a common trend of high mobile penetration throughout the region, Pyramid Research found that there are three separate and distinct categories to consider: countries with an underdeveloped financial system, countries with an emerging financial system, and countries with a developed financial system.

Underdeveloped Financial System

With a high proportion of unbanked and underserved people, countries such as Bolivia, Honduras, and Paraguay stand to benefit the most from mobile money. Mobile operator Tigo raised its number of monthly transactions on its Tigo Money platform in Bolivia from less than 140,000 to close to 1.2 million after just one year of operation. Honduras passed the one million Tigo Money user mark in early 2015, while Paraguay nearly doubled that number with 1.7 million users during the same period.

Emerging Financial System

For Colombia, Mexico, and Peru, banks and mobile operators are teaming up to develop mobile payment solutions. Mexico’s Telcel and Colombia’s Claro partnered with Mexican banks Banamex and Inbursa and Colombian banks Banco AV Villas and Banco de Bogota Grupo Aval to launch the Transfer mobile payment service. Like its East African counterparts, Transfer transactions are carried out using SMS text messages, allowing anyone with a feature phone or smartphone to use it. This service allows mobile operators to develop value-added services and differentiate themselves from the competition and the banks to reach a mass market with financial services.

Developed Financial System

Countries with more developed financial systems, like Argentina, Brazil, and Chile, mobile money and mobile payment have seen fewer users signing up due to greater competition from other forms of payment already widely in use, such as credit and debit cards. Mobile commerce apps and online shopping using the mobile browser are other types of mobile payment that have also gained in popularity. As a result, mobile operators in these countries have been signing agreements with Visa and MasterCard to create co-branded credit cards to raise brand awareness and build brand loyalty through program promotions.

In Latin America, one of the biggest game-changers for building greater financial inclusion may very well be bill payment services. The GSMA found that 11 percent of mobile payment transactions in Latin America were bill payments, compared with only 3 percent in East Africa. Promoting greater use of mobile money to pay bills for utilities and other services will go a long way towards getting more people to sign up.

What do you think is the best way to increase financial inclusion in Latin America?