A MOBILE PAYMENT ROMANCE — How M-Commerce is Courting Latin America
A Note from […], MasterCard
Consumers in Latin America, as well as around the globe, hardly go anywhere without their phones these days. Mobile enables millions of consumers to lead a more connected life – allowing them to do many activities that weren’t possible before.
At MasterCard, our goal is to develop technologies that allow consumers to pay seamlessly and safely, reflecting the reality and demands of today’s world. This includes being able to pay from any type of device — including mobile — through our various platforms and services.
Through our MasterPass digital wallet, Brazilians are using their phones and other connected devices to store all their cards’ information in one place, and enjoy checkout shortcuts with just a click, tap or touch. In Colombia, our innovative payment solutions are allowing consumers to seamlessly connect with taxi drivers to request and pay for a ride directly through their phones – no more standing in the street and hailing cabs.
In other markets, mobile phone usage is more prevalent than consumers with bank accounts, so the opportunity to promote financial inclusion is especially relevant. Through our joint venture with Telefonica and mobile solutions likeTu Dinero Movil, we are enabling people to use their cell phones to open accounts, transfer funds, and pay for bills without using cash… all simple actions that many of us take for granted, but that make an enormous difference in the lives of people in developing communities.
Consumers are not the only ones benefiting from mobile technology. Around the region, more and more small businesses and retailers that were previously “cash-only” are using their phones to accept payments thanks to our innovative mobile acceptance solutions and partnerships. This in turn, is helping them increase sales and make long check-out lines a thing of the past.
Moving forward, we will continue to evolve our mobile technology to empower consumers and retailers alike, and enable a world that is not just beyond cash, but also, plastic. With the rise in the adoption of mobile devices, and their transformation in the way that consumers shop and pay for things, we realize that today, more than ever, mobile technology is a key driver in realizing this vision.
Watch the video below to learn about our latest mobile solution in Peru, Tu Dinero Movil.
In the past, when you wanted to be a spontaneous shopper, you carried around a billfold or a purse full of cash. You spied a delicious treat or that perfect addition to the kitchen, you peeled off your bills to pay the price, and then you walked away with your prize.
But all that is changing.
Mobile payments are on the rise in Latin America. In key locations, the use of mobile is not only burgeoning, the rates of mobile-commerce expansion — starting from small bases of early adopters — are large and getting larger.
Corporations looking for a lasting m-commerce connection are paying attention as well. The push to put a buy-button into app and web users’ smartphones and tablets throughout Latin America has begun.
To further understand what’s happening in countries across Latin America, let’s turn to experts and data. We’ll break down 5 reasons why Latin American is embracing mobile, including: how m-commerce is working, where it’s growing fastest, and what m-commerce means for consumers and businesses throughout the region.
1. Latin America is embracing mobile payments
Mobile payments are growing as a go-to tool for Latin American consumers. That’s no surprise. The industry is courting the countries, one by one.
As a result, buyers and sellers are poised to play new roles in how we think and act about the marketplace — whether it’s a favorite jeweler’s shop or just the morning coffee stop, consumers are warming up to m-commerce.
“We are in the midst of a dramatic transformation in consumer behavior. In both developed as well as emerging markets in the region, what is changing is nothing less than how consumers interact: with their families, their friends, their communities — and also with businesses. This transformation is due in large part to the continued adoption of mobile devices, which is significantly altering the day-to-day shopping experience, and habits, of consumers, ” says Daniel Cohen, senior VP of emerging payments for MasterCard LAC.
- 7% of Mercadolibre’s sales occurred in the mobile space.
- 5–10% of Groupon conversions in Latin American happened on mobile devices.
Regionally, according to Ericsson and other sources, major players in Latin America include Brazil, Mexico, and Colombia. Have a look at what more of what researchers have found.
2. Mobile penetration is increasing every year in Latin America
“If we take Latin America as a [single] growing region, it follows the path of other developing countries in terms of mobile penetration,” said Fernando Ballester, who heads up Business Development at Yeeply.
“Like India or China, mobile penetration … is increasing faster each year,” he said. “Today, there are more than 340 million mobile users in Latin America, with Brazil and Mexico leading the race.”
“The market seems to be stabilizing,” Ballester added, regarding Latin Americans and their developing love for buying with mobile. “The prediction for 2017 is 374 million users.”
If Latin America wants to reach a half-billion mobile users, and beyond, however, experts say further growth will take some additional time and effort.
“Data shows that Latin America is still a ‘teen market’ in terms of mobile penetration,” said Ballester.
“For example, Costa Rica has seen a 332% increase in the number of users connecting to the Internet with a tablet or smartphone,” he said. “But that means it was coming from a very low number. And the same goes for more solid countries such as Brazil, Argentina, or Colombia — all of them with more than 200% growth.”
3. Consumers and merchants are hungry for more mobile solutions
As most of our daily activities are becoming streamlined through mobile and digital, consumers and merchants alike are eager for solutions that will make their lives easier. But how advanced can we say m-commerce in Latin American has become?
For answers, take a look at adoption-rate leaders such as Mexico. But also look at how the industry is adapting to — and educating others about — mobile payments, region-wide.
• Mexico’s mobile penetration rate is some 87%, with 20% of those being smartphones, according to OMLIS. That’s helping to drive mobile payments in the country to an anticipated $10.3 billion by the end of 2015. Point is, consumers owning mobile hardware are key to m-commerce rates. They’re the infrastructure that brings about adoption rates in the 31% range.
- “Fear of fraud continues to be the principal factor inhibiting the use of Internet as a transactional channel,” according to Easy Solutions’ 2014 reporton Latin American consumers’ views on electronic security. “However, it is possible to change user perceptions about security through the delivery of additional security measures,” the report suggested, citing “educational materials that inform users about how to use those measures effectively.” Latin American m-commerce users’ perceptions of security may well be improving. Forty-three percent told Easy Solutions they think online transactions are safer, circa 2014, as compared to 38% in 2013.
- The notion of wasting time looking for ways to withdraw cash, not to mention reducing the chance of losing your money in a mugging, is also part of what’s driving the shift to mobile payments. People are starting to get that message, and it’s happening all over. In countries on the cusp of this phenomenon — Sweden, for instance — m-commerce has driven vendors sales to a 59% increase.
- Innovators such as YellowPepper are encouraging merchants to get on the m-commerce wagon as well. As reported recently in the South Florida Business Journal, YellowPepper’s mobile-payment app, Yepex, is already rolling out in Mexico and Colombia, to start. The company is reaching out to merchants throughout the region to create a culture of knowledge around ways that m-commerce can work for them. Examples include merchants being able to push news of sales and special offers to consumers, and then reward loyal customers among their base. There are plans for further expansion throughout Latin America in 2015. Competitors such as Paymentez are following suit.
Banks are also pushing for mobile-commerce expansion throughout the region, “with smartphone apps emerging as the preferred channel for banks seeking to project a more sophisticated image,” as SAP reported, recently.
4. Mobile is driving financial inclusion in Latin America
When we talk about mobile payments in Latin America, we can’t leave out the topic of financial inclusion.
“More than 60% of consumers in Latin America are unbanked,” said Jason Oxman, chief executive officer at the Electronic Transactions Association, “meaning they live in a cash-only economy that denies them opportunities to transact, save for the future, and secure their finances.
“At the same time, mobile-phone penetration is approaching 60% in the region,” he continued, “M-commerce thus presents a unique platform for bringing financial-services access to Latin Americans who desire the financial security and safety that mobile payments — including SMS-based electronic transfers — can offer.”
With all these mobile phones finding their way into the hands of Latin American users, the region is looking at a crucial opportunity. As some markets reach a kind of tipping point — more mobile phones than bank accounts — the opportunity to reach consumers through mobile payments is poised to expand even further … and to even greater benefit.
- Building a Strong Financial Portfolio: Having formal credit lines and opening savings accounts (even if you don’t have a traditional bank) are the kind of m-commerce tools that open even more doors for individuals, even if they’re making a small annual income in a distant location. Using the tools of financial inclusion — mobile phones, money cards, etc. — helps empower users to develop even stronger financial futures.
- More than Things: Mobile payments can create access to more than just goods and banking services, too. New kinds of insurance emerge, for example, in which many users pool their resources to buy a neighborhood or a community coverage plan together.
And loan-lenders? They can average some 2.5% in returns on micro-loans via m-commerce in many places around the world. That should prove incentive to explore financial inclusion even further in many Latin American locations.
5. Latin America’s bright future in mobile
The romance between Latin America and mobile payments is underway.
Even the days of mistrust may be drawing to a midpoint, a critical crossroads: cautious adoption of mobile tech and mobile commerce seems set to move forward in the region. According to a recent Cisco report, mobile-data growth in Latin America is expected to top some 67% between now and 2017.
If that trend continues, then it brings us to what Omlis’ analysts suggest: Latin American countries stand to become “global leaders in Internet and mobile-payments use within the next five years.”
Infrastructure, opportunities, innovation, and security … that’s the recipe for a buy-button, one that mobile commerce leaders want Latin America to push. It is one that will open doors for mobile users and m-commerce providers — doors of a chapel, as it were — creating a long-wished-for and happy union in the years to come.