Due to the ubiquity of mobile phones in the Americas, the mobile channel offers a way to offer convenient, low-cost remittances, particularly since recipients are generally unbanked. Robin Arnfield investigates the alliances that are being formed for mobile remittances
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According to the Bill and Melinda Gates Foundation report How Agent Banking Changes the Economics of Small Accounts, m-wallets offer a cost-effective way to offer financial services to the unbanked.
"A branch cashier incurs 78 US cents in fixed costs per transaction, compared to 4 cents or less for an m-wallet," the report says.
"Immigrants to the US are avid mobile phone users, with 92% of them possessing mobile phones," the Inter-American Dialogue report Is there a match among migrants, remittances and technology says.
"Migrants who use their mobile phones for purposes other than making calls eg, text messaging are likely to consider using mobile-based applications to send money home."
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By GlobalDataHowever, Mark Beccue, senior analyst, consumer mobility at US consultancy ABI Research, says it is still early days for Latin American m-remittances.
"A factor holding back the development of cross-border m-remittances is the complicated ecosystems which need to be established," he says. "For domestic m-remittances, you do not need a lot of partners, but, if money is going cross-border, you have to create alliances with mobile operators in the receiving countries. You need to set up an end-to-end infrastructure."
Beccue says payment processors, mobile phone top-up providers, money transfer services, technology vendors and merchants are among partners collaborating to provide remittances to the unbanked in Latin America. These partners are developing services enabling cash to be transferred to a mobile wallet stored on a recipients mobile phone, and also mobile account-to-mobile account transfers.
These services have to overcome US and Canadian regulatory hurdles, integrate payment networks and technologies, and deliver remittances in an easy-to-collect and spend form. They must also compete in cost and efficiency with existing cash-pay-in and cash-pay-out remittances methods, such as Western Unions agent network.
Banks
In 2010, the Federal Reserve formed an alliance with US-based non-profit Microfinance International Corporation to encourage US banks to use international ACH networks for remittances to Latin America. Despite this initiative, US banks have largely left the remittance market to the likes of Western Union and MoneyGram. In Latin America, the role of banks is limited to acting as pick-up points for receivers to get their cash.
Due to banks experience in meeting regulatory requirements such as anti-money laundering (AML), m-remittance services involving banks as well as telcos tend to be particularly successful. One example is Philippines telco Smart Communications.
Vesta
Vesta, a company that provides white-label airtime top-ups for mobile operators, has first-hand experience of the difficulty mobile operators have in partnering with banks.
Portland, Oregon-based Vesta offers outsourced transaction processing, fraud prevention and channel management for cross-border airtime top-ups for mobile operators including AT&T, Telefónica, O2, and four Mexican carriers Telcel, (Telefónica subsidiary) Movistar, Iusacell, and Unefon.
Vestas prepaid.com portal enables mobile subscribers to buy airtime for other people around the world through its telco partners.
"Were in the process of signing up new partners and by the end of Q2 2011 we expect to be able to offer airtime top-up across most of Central and South America," says Joshua Rush, Vestas vice-president of marketing.
"Sending people airtime is a valuable thing to do, as people in Latin America use their mobile phones a lot," ABIs Beccue says.
"Mobile top-ups are a great jumping-off service Vesta wants to build on," says Rush. "We would willingly partner closely with banks for m-remittances and m-commerce."
Rush says Vesta wants to connect its telco clients in the US, Canada, Latin America, and South-East Asia together for services such as remittances from m-wallets to m-wallets.
"However, we would have to find the right partner for mobile financial services, and were very far away from doing so at the moment," he says. "The partners could be banks in Latin America, or money transfer companies."
Loading value via an airtime top-up network is not difficult. At prepaid.com, Vesta accepts payments via debit and credit cards, plus ACH transfers. However, delivering the payments to the recipient as anything but prepaid airtime is hampered by regulatory constraints such as KYC and AML, Rush says.
Fundamo
South African m-payment platform vendor Fundamo is a facilitator for cross-border mobile transfers in Latin America, Pakistan and Africa. Its technology has been certified by Western Union for use in mobile transfers and is also used by Accenture in the consultancys outsourced mobile money service (Accenture white-labels this service for telcos or banks).
In Latin America, Fundamo has partnered with US-based m-payments firm YellowPepper to offer YellowPepper Mony-branded mobile financial services in Latin America, including money transfers, remittances and bill payments. Currently, two banks and two mobile operators are using the Fundamo-YellowPepper platform.
Pakistans Easypaisa m-banking service, which uses Fundamo m-wallets, is managed by mobile network operator Telenor Pakistan and Tameer Microfinance Bank. Easypaisa allows remittances from 80 countries, including the US, to be picked up at Telenor Pakistan agent locations and Tameer branches.
Hannes van Rensburg, Fundamos CEO, believes that strict regulatory controls are vital for the success of m-remittances.
"No government wants mobile transfers to become a conduit for money-laundering," he says.
Van Rensburg is impressed by the State Bank of Pakistans efforts to regulate and facilitate remittances.
"The Pakistani central bank has set up a team to work on inbound remittances with the objective of increasing remittances," he says. "No other central bank has done such a thing.
"Pakistan is doing well with remittances, as its regulations are well ahead of any other emerging markets. The State Bank of Pakistan has rules to control the amount and frequency of remittance cash withdrawal. Pakistan has a national ID card system, which is an important factor. Anyone collecting international remittances has to show their ID card."
The Philippines
The Philippines, with itsms of migrants in the US, Canada and Brazil, is a centre of innovation for cross-border remittances.
"In the Philippines, one in 10 unbanked mobile money clients stores an average of $31 in his or her m-wallet, amounting to one-quarter of their household savings", the CGAP (Consultative Group to Assist the Poor) report Branchless Banking 2010:Whos Served? At What Price? Whats Next? says.
Domestic telco Smart Communications has teamed up with Philippines-based Banco de Oro Unibank to provide Smart Money MasterCard-branded m-wallets and linked prepaid cards that can be used not only for accepting foreign remittances, but also for a range of payment services in the Philippines. For example, recipients can withdraw cash from their Smart Money cards at ATMs.
Smart has established partnerships in North America with firms such as Western Union, MoneyGram and Vancouver-based remittance firm hyperWALLET Systems for the origination of fund transfers via cash or electronic payments.
In Brazil, Smart and MasterCard have launched a mobile remittance service using MasterCards MoneySend platform. The service enables bank customers to send funds from their payment cards to other cardholders via the Internet, mobile apps (on a smartphone), IVR or ATMs.
"Its early days for the Brazilian service," Brian duCharme, MasterCards vice-president, business leader for MoneySend Americas, admits. "What we offer is a facility enabling a Brazilian consumer with a MasterCard to link their card to their mobile phone and transfer funds to a MasterCard account in Philippines. The service can be used for card-to-card or mobile-to-mobile transfers."
Currently, MasterCard and Smart are limiting the service to consumers who hold cards issued by Brazilian bank Itaú Unibanco and are Vivo mobile phone subscribers.
MoneyGram
Incumbent money transfer providers Western Union and MoneyGram are seeking to protect their business by offering m-remittances.
MoneyGram has two m-payment services with partners in the Philippines. One is a top-up service enabling US-based Filipinos to reload mobile phone minutes for customers of Globe Telecom in the Philippines. The service is offered via a partnership with Greenwich, Connecticut-based Iris Wireless, which provides outsourced inter-operator SMS messaging and airtime top-up.
A partnership with Smart allows MoneyGram customers to collect remittances as cash at Smarts agent locations. Remittances can also be added to a Smart Money prepaid MasterCard.
"These partnerships are a good marriage between our company and mobile operators," Stu Keifer, MoneyGrams vice-president alternative channels, says. "Currently, we offer fund receipt (ie, receiving funds) services via these partnerships; send services will come in the future. The challenge for us is to give customers the flexibility to send money the way they want to."
Currently, MoneyGram clients wanting to send remittances to the Philippines load funds either via cash or bank card at a MoneyGram office.
MoneyGram wants to offer m-remittance services to Latin America and is working with local mobile operators and banks, says Dan OMalley, MoneyGrams executive vice-president, Americas. "But were hampered in many cases by the legacy infrastructure of our partners and agents.
Western Union
"Western Union is building a network of partnerships with banks, mobile operators and m-payment platform vendors that will enable customers to send or receive money via mobile networks," Khalid Fellahi, Western Unions head of mobile transaction services, says. "We think mobile transfers will be significant for us. Currently, mobile transfers are in their infancy and few of the available (m-remittance) services have critical mass but adoption is growing."
Fellahi likens the current attitude to mobile transfers to the situation when Western Union was starting its international agent-based remittance services.
"Everyone wondered if there would be a need but we built a network and customers came," he says.
"Our mobile transfer service is not just cash-to wallet but also wallet-to-wallet or wallet-to-cash. Were focusing on countries that already have m-wallets or other form of electronic accounts linked to mobile phones such as prepaid cards."
Western Union launched its Mobile Money Transfer service to the Philippines in 2008 via partnerships with Smart and Globe. Customers can send money from Western Union agent locations in 48 countries to mobile wallets or accounts linked to the mobile phones of Globe and Smart subscribers in the Philippines.
The recipient can cash out the money in their wallet by visiting a Globe or Smart agent location and transferring the funds to the agents wallet.
In countries such as Australia, Ireland, New Zealand, Switzerland, the UK and US, consumers can initiate mobile transfers online from westernunion.com using their credit or debit cards.
Globe currently has 24m subscribers, of which one million are enrolled in its GCASH m-wallet service. Smart has 45m subscribers, of which eight million are enrolled in its Smart Money service.
"To generate mass adoption, the wallet provider has to offer other services such as bill payment and domestic money transfers, as well cross-border remittances," Fellahi says.
Western Union has developed a gateway allowing it to connect its Mobile Money Transfer service with m-wallets from different providers. Seven open-systems providers have so far certified their platforms for connection to the gateway: Fundamo, Sybase 365, Comviva, YellowPepper, Utiba, mCheck, and MoreMagic.
The purpose of the certification programme is to make it easier for banks and mobile operators to offer Western Unions Mobile Money Transfer service by reducing technology integration costs.
Three proprietary m-wallet platforms have also been certified by Western Union: Vodafones M-Pesa, which is used by Kenyan mobile operator Safaricom; Indias Bharti Airtels mobile money service; and Zoompass, which was developed by EnStream an m-commerce joint venture between Canadian wireless operators Bell Canada, Rogers Communications and Telus.
"Todays hot spots for m-transfers are in South-East Asia and Africa, and these regions will be followed by Latin America and other developing countries," Fellahi says.
Western Union is looking to develop multi-channel delivery of its remittance services via bank partners.
"This would include initiation via smartphones, ATMs and the Web," Fellahi says. "We have developed a mobile app that bank customers can download to initiate a transfer from a smartphone. The app will be offered firstly in the US."
Telefónica
"Spains Telefónica will play a big role in driving m-payments in Latin America, because it is present throughout the region," says Beccue.
In January 2011, Telefónica formed a 50-50 joint venture (JV) with MasterCard to offer mobile financial services to the 87m subscribers of Telefónicas Movistar mobile subsidiary in 12 Latin American countries. Telefónica will offer subscribers m-wallets that can be used for receiving remittances as well as mobile airtime reload, bill payment and retail purchases.
The JV will act as a bridge between the financial and telecommunications sectors, MasterCard and Telefónica say.
See also: Players in Latin American mobile remittance market
