In this second entry to our spotlight on Latin America series we will explore the southern cone. Comprised of Argentina, Chile, Paraguay and Uruguay, this is a highly diverse group which overall exhibits the highest HDI (Human Development Index) of Latin America, and its relatively high standard of living make it the most prosperous macro-region.
That is not to say that mobile money for the unbanked does not have a place in these countries. In Argentina for example, the economic collapse in 2001 left more than half of the population living in poverty and completely eroded the trust in the banking sector. Although the country has partly recovered; in the past decade Argentina has struggled with record debt defaults which have left 10% of the population still living under $2 dollars per day. In addition, although the majority of the population lives in urban areas with a highly concentrated bank presence, BOP customers are suffering from exclusion partly due to the low levels of trust in the system due to the much advertised bank runs in 2001. Nevertheless, the conditions are ripe for mobile money from a bird’s eye view: 110% mobile phone penetration and 35% banking penetration.
In terms of deployments, two initiatives have sprung up. Argentina’s biggest credit-card issuer, Tarjeta Naranja (Orange Card), launched a service, “NaranjaMO” that lets subscribers make purchases or transfer money using their mobile phones. This service which can be activated on any mobile via SMS was launched in partnership with Movistar Telefonica and Claro, and has its roots in the provinces where there is a lower bank presence, and as result higher rates of financial exclusion. Tarjeta Naranja customers tend to be less well off and this could prove to be a successful strategy to tap into this market. Additionally, SMSpay, a similar third-party led service was recently launched as a pilot and is in the process of signing partnerships with various merchants and operators in the country. As a side note, the Central Bank of the Republic of Argentina (BCRA) is currently drafting bank agency and e-money regulation and given the high sophistication of users in terms of SMS use, as well as the launch of these non bank-based prepaid card schemes, it could be only a matter of time before we see operators launching mobile wallets.
Argentina’s western neighbour Chile has had Latin America’s fastest-growing economy in the past two decades and is today seen by most economists as a success story. However , in spite of its high rates of investment and growth, the country needs to set an example for the region and address its social inequality – a problem that remains one of the country’s main weaknesses given that 40% of the population remains unbanked. Paving the way for mobile money services, Entel PCS has recently teamed up with the country’s second largest bank Banco de Chile to launch a mobile money solution called Cuenta Móvil, which allows prepaid and postpaid customers to set up a bank account and make transfers as well as withdraw cash from the Banco de Chile’s ATM network.
Over to the north, Paraguay’s landlocked economy is largely informal and less wealthy than its southerly neighbours. Yet, in spite of this hurdle, it was the pioneer country which witnessed the first mobile money pilot in the region. In 2008, the largest cellular operator by subscribers, Millicom-owned Tigo, launched its service Tigo Cash, enabling users to make payments electronically using their existing handsets. Although compared to African deployments, Tigo Cash has attracted a relatively small customer base (150.000 users), this pilot has provided valuable lessons for future deployments as Tigo continues their plans to roll-out progressively in other markets in the region including Central America.
As we can see from the deployments we have surveyed, card issuers are having a strong role to play in the development of mobile money solutions. It will be interesting to see how current government cash transfer schemes which are already making use of cards, will make use of mobiles in the year to come.
Next week, we will explore Colombia.