Page 16 - State-of-the-Industry-2013

State OF the induStry 2013

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new mobile moneY moDels emerging in latin america*

Roughly 60% of adults in Latin America remain unbanked, ranging from 86% in Nicaragua and El Salvador to 44% in Brazil. [1]
Policymakers and regulators are recognising the valuable role mobile network operators can play in providing mobile money
services and are shifting towards frameworks that allow diferent business models to compete. Recent regulatory changes are
enabling non-banks to issue e-money in several markets, most notably Bolivia, Peru, and Brazil [2]. Other markets, like Mexico,
have provisions that allow non-banks to acquire limited banking licences to issue payments instruments. [3]

Enabled by this evolution in regulation, and encouraged by mobile money success stories around the globe, Latin American mobile
operators and new payments companies have launched new products and services in recent years. According to the MMU Deploy-
ment Tracker, there are now 29 live mobile money deployments for the unbanked across 18 markets in Latin America and the
Caribbean. With 19 planned mobile money launches, Latin America has the second largest number of planned deployments after
Sub-Saharan Africa.

A region known for correspondent banking models, Latin America is quickly becoming a testing ground for new mobile money
schemes, many of which seek to integrate with the existing fnancial infrastructure through companion cards and links to banking
switches. A range of business models are emerging, refecting not only diverse market conditions, but also the supply and demand
features unique to the region. At one end of the spectrum are models akin to those in Africa, where the mobile operator assumes
most of the functions in the value chain (e.g. Tigo Money). At the other end of the spectrum, we see banks driving schemes, in some
cases even acquiring mobile virtual network operators (MVNOs) to ofer mobile fnancial services independently of mobile operators
(e.g. Bancolombia’s Ahorro a la Mano). New entities dedicated to mobile payments, such as joint ventures between mobile opera-
tors and fnancial institutions and/or card companies (e.g. Transfer and Wanda), are also ofering a salient alternative approach to
mobile money in the region.

As a mobile operator with a presence in Africa and Latin America, Millicom has been particularly active in mobile money and has
gained experience in 10 diferent regional markets. In Latin America, Millicom’s Tigo Money is operational in fve Central and South
American markets (Bolivia, Guatemala, El Salvador, Honduras, and Paraguay) with a total of over 1.4 million mobile money custom-
ers. In Paraguay, more than one-quarter of Tigo’s customers use mobile money. [4]

With over 400 million GSM subscribers out of 550 million total subscribers in the region, America Móvil and Telefónica have
developed group-level strategies for mobile money. America Móvil launched Transfer in Mexico in April 2012 as a joint venture with
Banamex (a Citibank subsidiary) and Banco Inbursa. America Móvil (Claro) has since launched Transfer in Colombia. In Brazil, Claro
has partnered with the largest retail bank, Banco Bradesco, to launch a variant of Transfer: Meu Dinheiro Claro. Telefónica/Movistar
is also increasingly active in mobile money. Telefónica and MasterCard have a joint venture through which they have launched
Wanda in Argentina and Zuum in Brazil.

While early signs are promising, more must be done for mobile money to take root in Latin American markets. Overall, adoption and
usage of mobile fnancial services in Latin America still lags behind other regions, but it is clear that the region is ripe for innova-
tion. The growing number of deployments and range of business models being adopted in the region are encouraging. Competition
is clearly heating up, and investment and interest from the private sector are growing. Mobile money in Latin America may have
reached a turning point.

* Written by Mireya Almazan (MMU)
1. The Global Financial Inclusion (Global Findex) Database, 2012
2. Mireya Almazan, “Mobile Money Regulation in Latin America: Leveling the Playing Field in Brazil & Peru” (December 19, 2013),
available at http://www.gsma.com/mobilefordevelopment/mobile-money-regulation-in-latin-america-leveling-the-playing-feld-in-brazil-peru
3. Xavier Faz, CGAP, “A New Wave of E-Money in Latin America,” (June 2013), available at http://www.cgap.org/blog/new-wave-e-money-latin-america
4. Millicom International Cellular S.A. 2012 Annual Report and fnancial statements:
http://www.millicom.com/sites/default/fles/Millicom_AR12.pdf and http://www.millicom.com/investor-relations/key-fnancial-data

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