By Tiago Novais From GSMA

A great opportunity for mobile operators to offer mobile money services and close the financial access gap still exists in Latin America & the Caribbean (LAC). The unbanked and underbanked population in the LAC region is still high, on average around 50%, ranging up to near 80% in countries such as Nicaragua and Haiti. Despite successful alternatives in the region such as banking correspondents, traditional financial services on their own have not been able to provide ubiquitous inclusion.

Although mobile money is still a nascent industry in the region, continued progress has been made since the first service went live in 2010, with steady growth rates being reported year on year. In 2015, the GSMA’s mobile money programme produced the first detailed study on the LAC region, which highlighted some particularities:

Outside of LAC, mobile money has been driven by the classic ‘send money home’ concept. This means P2P transfers have dominated the transactional landscape. In LAC, the product mix shows that ecosystem transactions are more prominent, in particular bill payments and bulk disbursements.
There are two market types in the region: (I) markets with lower GDP and a less developed financial system – in which mobile money has been relatively successful, and (II) markets with higher GDP and more sophisticated financial system – in which mobile money has been a more challenging proposition.
While overall transaction volumes and values are still small relative to other regions, customer activity rates in LAC are higher than the global average.
What’s next?To understand how mobile money in LAC develops in the future, we can look into some of today’s trends:
Companion cards: The role of companion cards has been highlighted in a previous blog and our new publication brings an additional in-depth look at this offering. The report shows that cards can be a way to drive ecosystem growth, although the overall business case depends on each mobile money provider’s strategic considerations. In LAC, companion cards have been available mainly on type II markets and more providers are considering adding this channel to their overall service offering.
Integration with public transport: Public transport, usually characterised by recurrent low value transactions, is an everyday need in urban centres. In fact, low-income populations can spend over 20% of their net income on home-to-work trips. Mobile money providers who succeed in bridging both services can see potential increase in active customer rates, as well as the perceived value from mobile money services. This integration can happen from partnerships with transport authorities where services are well-structured (e.g., ZUUM in Brazil) to mobile money providers acquiring the ticketing system themselves (e.g., MPeso in Nicaragua).
International remittances: LAC has major remittance corridors, accounting for 20% of the global received remittances market, or a US$ 67 billion business in 2015. Mobile money can be the most convenient method of sending and receiving remittances, speeding delivery to destination customers and at the same time, decreasing expensive over-the-counter remittance fees. New partnerships can be developed with traditional and fintech remittance companies, in addition to the use of the companion card on international purchases.
Mobile operators are best placed to offer services for the underservedMobile money in Latin America & the Caribbean, driven largely by the variation in market context, will look different than it does elsewhere. Mobile operators are still best placed to cater for the underserved, given their unrivalled physical capillarity and ubiquitous presence in the lower income segment. If providers can develop the right ecosystem partnerships, then the region can build a strong mobile money industry and improve financial inclusion.The mobile money team will be closely following these trends as they unfold. Do you foresee other trends in the LAC region? Let us know by writing a comment on this post.

For more on this story go to: http://www.gsma.com/mobilefordevelopment/programme/mobile-money/understanding-mobile-money-trends-in-latin-america-the-caribbean#!

Related:

Visualising the mobile money industry in Latin America & the Caribbean

By Jennifer Frydrych From GSMA

Today we’re launching a new infographic about the progression of the mobile money industry in Latin America and the Caribbean.

Half of all adults in the region are excluded from formal financial systems. Mobile money is already helping to change this landscape, and has the potential to truly transform access to financial services across the region. As of today, there are 37 live mobile money services across 17 countries in Latin America and the Caribbean. A variety of players—including mobile operators, banks, microfinance institutions and small dedicated financial service providers—are offering these mobile money services.

For more on this story and graphics go to: http://www.gsma.com/mobilefordevelopment/programme/mobile-money/visualising-the-mobile-money-industry-in-latin-america-the-caribbean#