Tuesday, June 08, 2010

M-Banking - Adoption in Latin America has been slowed by focus on the consumer instead of the merchant

[bnamericas] Mobile banking is available in Latin America, but its growth has been slowed due to banks and telcos taking a wrong approach, and the industry's erroneous focus on the consumer rather than on the merchant, a senior representative of the World Bank's private sector arm IFC, Andi Dervishi, told BNamericas.

According to Dervishi, who is IFC's global lead for investments in e-payments and marketplaces, many banks have launched offerings encouraging consumers to use their cell phones to check their bank balances or make payments. Where they have gone wrong is in not segmenting the market.

"Students will use electronic money differently than farmers, for example," Dervishi said.

This has led to a new breed of independent operators that are non-banks and non-telcos, but that are doing a much better job of encouraging e-payments.

"[These independent operators] segment the market, they target the specific market, then they sell a service that is very similar to any electronic payment, that specifically addresses their concerns, that specifically addresses their needs," Dervishi said.

One example of this type of operator is a US-based platform called Yellowpepper, which is now present in six countries in Latin America and has an estimated 1.7mn subscribers that make 6mn transactions monthly.

"[The company] works with banks and bank customers. It knows how to market, it knows how to push the mobile channel and it teaches the bank how to push the mobile channel so together they go to market," Dervishi said.

"They convince the customer of the benefits of using the mobile to make banking transactions, to pay their bills, to check their balances, to enquire about a payment or transfer they made."

Another independent, which is not strictly mobile, is Dinero mail, which is Latin America's response to Paypal.

"Their target audience is internet merchants, people who sell goods on the internet. The message is very clear. If you want to sell goods on the internet, this is the best way to immediately adopt a payment method. It's very easy to integrate, it's very secure, but the target market is the merchants," Dervishi said.

According to the executive, what the industry has been doing wrong is in trying to force consumers to use electronic money before there is a critical mass of merchants that accept it.

"The focus has wrongly been on the consumer. I think the focus should remain more on the merchant, on the retailer, on the outlets so they accept electronic money and then the consumers will accept it as another way of paying," Dervishi said.

Many banks have boasted that consumers do not need a fancy phone to carry out mobile banking, but can do it using basic SMS. However, it is still easier for a relative newcomer to the mobile e-payments world to understand how it works using a phone with a better graphic interface.

"There's a bit of irony there in that usually the people who cannot afford a smartphone are probably the most challenged from the point of view of usability. The most illiterate actually need the faster phone, the smarter phone because it is a bit more graphic," Dervishi said.

That said, there is hope, as the cost of smartphones is rapidly falling.

When does Dervishi think there will be a critical mass of mobile banking in the region?

"It's hard to make those predictions. But I would say that in two or three years, or four years maximum, Latin America will have a critical mass of electronic money that transacts through cell phones," he said.

Mobile banking adoption slowed by wrong approach - IFC

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