"Mobile payments has made its mark on Latin America"

The Latin America and Caribbean (LAC) payments market is characterised by a high-growth population that are quick to adopt new payment technologies. As more government bodies and organisations introduce prepaid programmes, it is increasingly important to understand the trends so that we can forecast growth and direction.

LAC is characterized by heterogoneous financial systems. Based on this, there are a number of current trends in retail payments market that we are currently witnessing in the region:

• Increased used of internet-based technologies for accessing banking accounts and transferring funds either P2P or P2B-B2P.
• Mobile phone has been gaining terrain as accessing device and channel for innovative payment solutions.
• Financial inclusion has driven developments and public action seeking the expansion of access and usage of electronic and digital payments.
• Significant gainings in safety and efficiency in retail payments markets thanks to innovative products. This, however, poses challenges for major stakeholders to strike a balance between regulation and modernisation in the industry.

Mobile payments has made its mark on Latin America - markets response to innovative payment solutions indicates a shift in behaviour from costly and inefficient paper-based instruments to electronic and digital means. The use of mobile as a gateway, either from the end-user and the infrastructure perspectives, for electronic and digital retail payments has gained relevance in LAC, by means of enhancing competition in markets (serving as bridge for non-traditional payment service providers) and by speeding up processes in the payments chain. This has also been a key driver for authorities to open the discussion for balancing the framework of innovation and regulation of mobile payment solutions.

Looking at Latin America’s mobile point-of-sale industry

Currently, mPOS is seen as an engagement tool bringing retailers closer to consumers. Moreover, mPOS seems to be in an early stage of development within the region yet has potential to make a big impact on both customers and retailers. It represents a great opportunity for broadening scope, from the retailer side, and acceptance of this technology in markets where habits of using a physical point-of-sale exist. There is a challenge to oversee providers and products ensuring compliance with consumer protection and AML/CFT standards, as well as with other best practices regarding cybercrimes in ecommerce.

Entry of non-financial institutions and new payment service providers (PSPs) is increasingly seen in many financial markets in the region. Non-banks and non-traditional PSPs are changing the rules of the game in LAC. They have demonstrated ability in addressing needs of the underbanked and unbanked while also solving coverage and accessing issues in underserved markets. It is still necessary in developing frameworks that enables a secure use of the funds of the end-users, especially when these new comers take deposits or they have a significant market share that could affect critical services in the economy. Indeed, it would be desirable to achieve appropriate collaboration, coordination and cooperation within the industry to reach economies of scale and scope. This would help PSPs to address some of the challenges they face including natural market barriers (directly or indirectly posed by traditional players) and the lack of a clear and proportionated legal framework are existing gaps in LAC payments market to allow non banks entering in the stage.

As it concerns financial inclusion, this is rapidly rising to the top of the agenda. Three factors are needed to achieve this: leadership, cooperation and competition. Leadership from major stakeholders, including governments, to foster financial literacy and transition of payment habits.

Cooperation within the industry to explote economies of scale and scope, harmonizing market practices and getting interoperable environments. And finally,competition among players, including non banks and other new comers, to provide innovative electronic and digital solutions.

Prepaid Americas, which has been held in partnership with the Prepaid International Forum, took place on March 23, 2015 at the Marquis Reforma, Mexico City, Mexico. The event was co-located with the successful and established Mobile Money and Digital Payments America conference and with Transport Ticketing Americas, giving delegates the opportunity to attend these two events at the same venue, on 24-25 March. 

About Raúl Morales:

Raúl Morales manages the portfolio of activities for Payments, Markets and Infrastructures at the Center for Latin American Monetary Studies (CEMLA), the Latin American and Caribbean central banks association. One of his main duties is assisting central banks in modernizing and reforming their national financial market infrastructures via implementing technical assistance and cooperation projects.

Among others responsibilities, Mr. Morales holds the Head of the Secretariat of the Working Group on Payment System Issues for Latin America and the Caribbean. He also represents CEMLA in several international committees on payments and credit reporting issues.

Raúl Morales was a speaker at the inaugural Prepaid Workshop in Mexico City on March 23, and has touched upon “How has the Americas prepaid market evolved and what can be learnt from deployments in both developed and emerging markets”.

About CEMLA:
CEMLA is the regional association of Latin American and Caribbean Central Banks and is responsible for implementing a program to supply the central banks with technical cooperation and assistance on addressing payments, financial infrastructures and markets issues.