The mobile phone is set to unleash a radical transformation of the Latin American financial ecosystem, setting the stage for a fundamental shift in the consumer experience. Until recently the region lagged behind pioneers in Asia and Africa, but today Latin America is experiencing rapid growth in the mobile money space.
Few services in Latin America have the reach that mobile telephony enjoys. The fraction of Latin Americans toting mobiles has soared to 80% in the past few years, and at the current rate, by 2020, mobile penetration in the region will reach 117%. Today, as mobile network operators start to look into other value added services, and policy makers push for greater financial inclusion in the region, growing opportunities are emerging to pair the everyday basic voice and data services with access to financial services. Mobile money has arrived.
It is estimated that only 35% of adults in Latin America have a bank account, compared to over 2 accounts per person in many developed countries. In the region, especially in rural areas, access to financial services can be costly and limited. However, experiences from other countries, particularly in Africa and Asia, have demonstrated that the mobile phone can be an extremely effective way to provide financial services to the unbanked.
Of the region’s 460 million mobile subscribers, more than 240 million live on less than $300 a month. With the introduction of mobile money,considering an average of 3 transactions per month – including one microcredit payment, one service payment, and a money transfer – this group alone would make 620 million monthly transactions, or over 7 billion transactions every year. If nothing else, mobile money increases security, by providing an alternative to carrying cash – a daily reality for those without access to formal financial services.
Latin America has the hallmarks of a mobile money market as exciting, if not more so, than the burgeoning markets in Asia and Africa. In common with all developing regions, PC, fixed Internet and fixed-line telephone penetration in the region is and will remain much lower than in the US or Europe, which means that for Latin American countries the mobile is the primary access route to the internet and therefore to distance banking. There is also much more commonality of first language – for example Spanish, Portuguese, French and English – between Latin American and Caribbean nations than Asia or Africa, where mobile money has flourished.
At 578 million, Latin America’s population is much closer in size to North America’s 352 million and Europe’s 733 million than Africa and Asia’s combined 5 billion people, and as is the case in Asia, remittances to Latin America represent an important source of income for many people.