Treasurers are being offered mobile solutions to allow them to authorise and initiate payments from their mobiles in Latin America, but security and regulation is still a big concern.
Sandy Shen, research director at Gartner, the technology research firm, predicted global mobile transaction volume to average around 42% annual growth between 2011 and 2016 and forecasts “a market worth $617 billion with 448 million users” by the end of this period. However, this rise in mobile payment transactions does not seem to extend to the Latin American region.
Victor Zegarra, treasurer at Andrade Gutierrez, a Brazilian infrastructure group said that he doesn’t feel comfortable making mobile payments due to security issues. “I don’t feel comfortable executing operations on a mobile, mainly because I consider it’s still in a development phase and I wouldn’t like to have security or system problems. It would involve a big change in our company procedures, but I see a lot of value in this since we are in the process of centralising cash management.”
Another treasurer, Mariano Tannenbaum from Arcos Dorados, McDonald’s largest franchisee based in Argentina, has a similar attitude towards mobile payments and has said he “would use it once the security is proven and after validating it with our audit department.”
60% of the Latin American population remains un-banked and cash is more widely used than mobile, despite the fact that the region has more mobile phones than televisions.
There has been some progress in Paraguay, Columbia and Haiti, but treasurers who were expecting mobile payments to solve their cash handling problems in Latin America have been left disappointed. Juan Pablo Mojica, Nestle’s Latin American treasurer is one of those unsettled by the lack of interest in this form of payment because many of Nestle’s clients are small shopkeepers from isolated areas who pay in cash. “We have operations in 22 countries including the Caribbean islands. The problem is big,” Mojica said.
Some mobile payment schemes can operate without the customer needing a bank account. This raises the question why electronic banking has not been more popular than traditional financial services in a region where there is a lack of effective banking infrastructure.
Cash remittances, where money is sent to remove an obligation over electronic network, wire transfer or mail, have been more popular than mobile payments in Paraguay, Haiti and other countries where there has been an adoption of mobile money. Alongside this, there has been an increase in “corresponsalías bancarias”, where banks use retail branches like supermarkets and pharmacies to receive payments.
Camilo Tellez and M. Yasmina McCarty, in their report “Mobile Money in Latin America”, mention that clients receiving remittances may have a mobile wallet but would cash out the full balance if the transaction is done through an agent. Clients have no need to store money on their phones, which would usually be done with a bank account and makes it “difficult to introduce e-wallet based money transfer or payments.”
Education of mobile money would be a simple way of combatting this problem but banks have been successfully stopping carriers from offering mobile banking services. In addition to not encouraging mobile payments, banks often charge for these services, for example, Mexican banks charge customers both to take out money from ATMs and if they use another bank’s ATM.
Corporates may have to promote electronic banking in innovative ways, such as the way Fernando Rosales, corporate treasurer at Gruma, a globalised Mexican food company offers discounts to customers paying with electronic money.
Regulation is important for Latin American corporates and according to Tellez, “players may feel that what is not expressly regulated is not allowed.” Companies are worried about creating products and then having the service shut down, like the mobile services company Tigo, which successfully spread the use of mobile money in Paraguay, but were closed down when they launched in Bolivia.
Aldo Mendes, the deputy governor of the central bank of Brazil says the country intends to promote payments and the use of virtual accounts as “there are more mobile phones than people. The idea is to promote financial inclusion not by traditional means and bank branches.”
Chile have also been working on their regulation and according to Rodrigo Solis, country manager Chile at Kuapay, a mobile payments application provider, “a carrier is not allowed to provide financial services without a bank license.”
Physical cash is a serious competitor for mobile money especially where taxes on financial transactions exist and some treasurers believe that being paid in cash results in good business. According to Eurofinance, one treasurer said they “receive a million dollars in cash every day. With that I pay my suppliers without paying the tax.”
