This was my presentation for the Mobile Money Summit 2010 in Rio de Janeiro.
It follows Afi's understanding of the Latin American environment for mobile financial services since we first knew about Kenyan and Filipino experiences back in 2007. Bottom line: regulation has a key role in enabling new business models.
Institutional and regulatory environment for Mobile Financial Services: What makes Latin America different?
1. Institutional and regulatory environment for MFS
What makes Latin America different?
Rio de Janeiro, May 25th 2010
Álvaro Martín Enríquez (amartin@afi.es)
http://movilybanca.afi.es
2. Why we looked at Latin America in 2007
• Could early experiences be replicated in another region?
Source: www.outline-world-map.com (2009) 2
3. Access to formal financial services was relatively low…
Source : Honohan (2007) 3
4. Traditional financial distribution was insufficient…
Branches and ATMs per 100.000 inhabitants (2006)
Bolivia
Peru
Mexico
Colombia
ATMs
Ecuador
Branches
Chile
Argentina
Brazil
USA
Spain
0 20 40 60 80 100 120 140
Source: Beck, Kunt & Martínez-Pería (2006) Banking Services for Everyone? Barriers to Bank Access and Use Around the World 4
5. Large remittance flows were not being captured by banks…
• US$ 66.5 billion remittance inflows in 2007
El Salvador
100%
Nicaragua Honduras Remittances received through
80%
financial institutions
60%
Guatemala 40% Ecuador Recipients with bank accounts
20%
0%
Jamaica Mexico
R. Dominicana Peru
Colombia Bolivia
Recepción Rem esas por Entidad Financiera Receptor con cuenta de ahorro
Source : IADB (2009) 5
6. There was room for improvement…
Access to formal financial services vs. GDP per Cellular subscribers per 100 inhabitants vs.
capita in emerging countries GDP per capita in emerging countries
90% 140
80%
120
70%
100
60%
50% 80
40% 60
30%
40
20%
20
10%
0% 0
0 5000 10000 15000 20000 25000 30000 0 5000 10000 15000 20000 25000 30000
Africa Europe Latin America Asia Africa Europe Latin America Asia
Source: Afi from Honohan (2007), IMF (2007) & ITU (2008) 6
7. 80% of Latin Americans were covered by cellular networks…
Cellular Population
coverage density
(2007) (2000)
Source: GSMA (2007) and Latin America and the Caribbean (LAC) Population Database (2000) . Population density in people/km2 7
8. Mobile penetration was growing fast…
Cellular subscribers per 100 inhabitants
140
120
Cellular subscribers per 100 inhabitants
100
80
60
40
20
0
2002 2003 2004 2005 2006 2007 2008
Latin America
América Latina EmergentesAsia
Emerging Asia EmergentesEurope
Emerging Europa Africa
África
Source: ITU (2009) 8
9. Some of the largest MNOs were operating in the region
Market share (subscribers) in Latin American countries (2007)
100%
80%
Cuota de mercado
60%
40%
20%
0%
ARG BOL BRA CHI COL R.DOM ECU MEX PAR PER URU VEN
Telefónica América Móvil Telecom Italia Otros
Source: Pyramid Research (2007) 9
10. Despite this, Latin America still lagged behind until recently
2001 → 2002 → 2003 → 2004 → 2005 → 2006 → 2007 → 2008 → 2009 → 2010
Source: www.outline-world-map.com (2009) and GSMA Mobile Money Deployment Tracker (2010) 10
11. What were we missing?
• Success is difficult to achieve due to a complex environment:
– Competition (banks, money senders, payments)
– Strategic priorities for telcos (opportunity cost, externalities)
– Regulatory and institutional environment
90%
80% 77,4% 77,4%
70%
62,3%
60%
50%
43,4%
40%
30%
18,9%
20% 15,1% 15,1%
10% 5,7%
1,9% 1,9%
0%
Airtime Domestic Bill Payments Merchant Links with International MFI Loan Salary G2P Insurance
Purchase Money Payments Bank Money repayment or Payments
Transfers Accounts Transfer disbursement
Source : www.outline-world-map.com (2009) and GSMA Mobile Money Deployment Tracker (2010) 11
12. Shared roles between mobile operators and financial institutions
Transactions,
application & Transactions & Account-linked Pooled deposit
deposit deposit deposits
BANK
BANK
BANK
3rd BANK
parties
MNO
MNO
MNO
MNO
Application & Financial
Carrier Joint Venture
Carrier Institution
Source: Afi 12
13. Certainty and openness in Latin American environments
Source: Afi & Bankable Frontier Associates (2009): How Enabling is the Latin American Environment for Mobile Money? 13
14. Classifying mobile financial services
Services over banking Services over non-
stores of value banking stores of value
(mobile banking) (mobile wallets)
Transformational models
MTN Banking (South Africa) Oi Paggo (Brazil)* M-Pesa (Kenya)
Wizzit (South Africa) Tigo Cash (Paraguay) Gcash (Philippines)
Mobile Money (Jamaica) Smart Money (Philippines)
Mobi Cash (Morocco) Orange Money (Ivory Coast)
Zap (Kenya, Tanzania, Uganda)
Additive models
Link Celular (Argentina) Nipper (Mexico) Crandy (USA, France)
Pichincha Celular (Ecuador) Mobipay (Spain) Obopay (USA)
Banco do Brasil (Brazil) mChek (India) PayPal Mobile (USA)
… Pago Móvil (Peru)
* Oi Paggo is a credit-based mobile payment system that requires no bank account, but it is not strictly a mobile wallet 14
16. Institutional framework
Banking Payments Ministry of
supervisor supervisor NRA Telecoms
(Superintendency) (Central Bank)
Consumer
protection body
Non-banking
Banks
financial institutions Ministry of
Finance (Tax
Telcos Agency)
Payments
Money senders
processors E-certification
body
16
17. Regulatory improvements are coming
• Banking agents (Bolivia, Brazil, Colombia, Ecuador, Mexico, Philippines,
India, Kenya, South Africa…)
• Basic accounts (Argentina, Brazil, Mexico, India, South Africa …)
• E-Money:
• Regulated issuers models (EU, Philippines)
• Trust models (Kenya)
• Granting MFIs access to payments systems (Ecuador)
• Consumer protection and financial literacy programs (Mexico –
CONDUSEF)
• Tax barriers removed (Philippines, FTT removed after study in 2006)
• …
17
18. Institutional and regulatory environment for MFS
What makes Latin America different?
Rio de Janeiro, May 25th 2010
Álvaro Martín Enríquez (amartin@afi.es)
http://movilybanca.afi.es