Mobile operators have a key role to play in fostering financial inclusion in Latin American countries with underdeveloped financial services markets through m-payments offerings, according to a new report by Pyramid Research.
According to Pyramid Research, several Latin American countries have the elements in place to drive the adoption of mobile payment solutions, namely, a large population which is underserved by formal financial services, high mobile penetration rates, and an increasing m-commerce market.
While the market factors are prime for successful implementation of m-payment systems, the best suited player to launch such an offering depends on the state of the formal financial services sector, as well as the levels of mobile uptake in the specific country, the research finds.
According to the report, most of the countries in Latin America boast high mobile penetration rates, driven by an increase in affordable mobile devices, improving network coverage and poor fixed line infrastructure.
Conversely, access to debit and credit cards varies widely across Latin America. As a result, Pyramid says Latin American markets can be divided into three distinct categories.
The first such category comprises countries with an underserved financial sector and developed mobile services market, such as Bolivia, Honduras and Paraguay. According to Pyramid, the market in these countries is ideal for an operator-led m-payments solution.
Pointing to Tigo's successful launch of the Tigo Money service across Latin American countries falling into this category, Pyramid concludes: "In these countries m-money solutions serve as a key platform for financial inclusion."
The second category of countries is characterised by an emerging financial system and a developed mobile services market. Countries such as Colombia, Mexico and Peru are grouped into this category.
Here, Pyramid says partnerships between mobile operators and banks promise the best results of the launch of mobile payments solutions.
"The operator-bank relationship benefits both stakeholders: for banks, m-payment solutions are a way to reach a mass market with financial services; for mobile operators, an opportunity to develop value-added services and differentiate from competitors," Pyramid says.
The final category of countries can be described as having a developed financial sector and a developed mobile market, Pyramid says. Countries such as Argentina, Brazil and Chile belong to this category.
In this category, the research suggests operators face heightened difficulties in launching mobile payments products, given competition from formal banking providers.
In this case, Pyramid m-payments can still achieve prominence in the online purchasing sector; which in turn leaves the market open to new entrants such as device manufacturers, and online companies.