Last month, Tigo Money launched in Guatemala and Honduras.

The MMU team had a chance to catch up with Juan Carlos Arriaga, Head of Mobile Financial Services in Guatemala to discuss about their new product and the challenges and opportunities in rolling out in the Central American Region.

MMU:  Juan Carlos, congratulations on the launch.  We are increasingly seeing more deployments in the region.  What is your opinion regarding this change in the market?

JCA: In the past, there was no real need for it in the market.   MNOs in Latin America were not focused on mobile financial services, partly because of regulatory constraints, but also because of the robust growth in the airtime business.  In some countries, we are still seeing growth opportunities in terms of coverage to rural areas and this has been the focus for the past couple of years, but now that mobile penetration rates are hovering around 90%, we are starting to look into other value added services. The lack of regulation in some countries has also slowed down this process and given that civil jurisprudence is followed throughout the region, in some markets this has proven to be a major stumbling block.  Not to mention, our proximity to the US makes us much more vigilant when it comes to AML controls, etc.

MMU: What mobile money offering has the biggest potential to address the needs of unbanked Latin Americans?

JCA: I believe domestic, but most importantly, international remittances will play a major role in the roll out of mobile money in the region.   The World Bank estimates that around 6 to 7 % of Guatemalans reside abroad, mainly in the US .  Guatemala received about $4.1 billion in remittances in 2010-  — about 9.8 % of its total gross domestic product. Guatemala’s dependence on remittances highlights some latent demand which we want to address with Tigo Money in the long run.

MMU: Can you describe the service for me?

JCA: At the moment Tigo Money is a domestic remittance service. Users can send and receive money via any of Tigo’s 500 agents present in all 22 provinces of the country. The service enables users to send or receive money via SMS.  The amounts remitted can range between 5 and 2,500 Quetzals ($.64USD to $320 USD), and we hope that once users become more familiar with the service, the platform will evolve to offer a further array of OTC  and m-wallet services in the near future.

MMU: How much do you charge for your service?

JCA: Guatemala is a country where more than half of the population resides in rural areas. We actually did a domestic market study and found that the average remittance in the country is 500 quetzals or approximately $65 USD per month. In addition, the minimum salary in the country is approximately 200 USD. This information led us to setting the Tigo Money commission at 6% and to set the monthly transaction limits at 320 USD.

MMU: What role do agents play in your model?

JCA: Agents play a very important role in Tigo Money´s commercial model since they are the first point of contact with our consumers.  Also, they help our trainers by spreading the effort of educating the consumer.  As Tigo has approximately 50% market share in Guatemala, this means we can select the best agents to become part of Tigo Money. We are using our pool of airtime super agents to manage liquidity at agent level and cherry pick the agents we think can provide our consumers with a better value proposition.

MMU: How have you promoted Tigo Money? What are the challenges in marketing this new product?

JCA: In Central America, remittances are  a very well understood concept,  whereas e-money doesn’t exist yet.  The local population understands very well the concept of sending and receiving money, and in our experience, they do not really see the delivery channel as a major decision influencer.   Customers care about the cost of sending money and the ubiquity of its agents.  As a result, we are placing our agents in high traffic areas where users in the bottom of the pyramid will find it convenient to use the service. In addition, given the high rates of mobile penetration in the country, users are also very comfortable with the concept of e-top-up. We hope that given this familiarity with this concept will help us take that initial step towards a wider understanding of mobile money amongst the local population.

MMU:Yours is the first service to be launched by an MNO in Central America.  How is the customer need for mobile money here the same or different than in other parts of the region?

JCA: BOP users in Central America depend economically on remittances. Large numbers of the population have emigrated to the US and Mexico and this situation results in cyclical flows of money coming into the country.    We hope that our service will allow money to flow more effectively throughout the economy.   We have also found that even in the BOP segment, there is a high rate of consumption for VAS technologies such as 3G.  Given the familiarity that users have acquired while working abroad or through their family and emigrant networks, we think this will have a positive impact on the service as it matures into a wider gamut of services being offered over the platform.

MMU: How will the Tigo Money service in Guatemala be the same or different from other countries where Tigo has launched (Paraguay, Tanzania, Ghana)?

JCA: The existence of alternatives plays a big role in the shaping and design of a mobile money service. The approach Tigo is taking in the region is somewhat similar, but regulation at the end of the day dictates what kind of service we can provide.     The maturity of the African market has lead to different types of services being offered and at the moment in Latin America, the focus is on educating customers in order to increase their level of knowledge and sophistication when it comes to mobile money.

MMU: Thank you, Juan Carlos.