View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Uncategorized
March 20, 2012updated 04 Apr 2017 4:14pm

Mobile expected to boost P2P payments in LatAm

Despite Latin Americas fast-growing internet population and e-commerce markets, online person-to-person payments are still embryonic in the region. But the advent of mobile payment services is expected to stimulate growth in P2P transfers, industry observers tell Robin Arnfiel

By Verdict Staff

Despite Latin America’s fast-growing internet population and e-commerce markets, online person-to-person payments are still embryonic in the region. But the advent of mobile payment services is expected to stimulate growth in P2P transfers, industry observers tell Robin Arnfield

 

According to Tendencias Digitales, the number of internet users in Latin America rose by 9 percent in 2011 to 218.9 million – or 37 percent of the region’s total population – from 200 million in 2010. Online shopping transactions rose by 50 percent year-on-year in 2011, the Latin American consultancy says.

They told VRL Financial News that Spanish-speaking countries in Latin America had a total of 140 million internet users in 2011. And that is excluding Brazil, which 78.9 million internet users alone.

eMarketer estimates that B2C e-commerce sales in Latin America, excluding Brazil, will rise from $15.2 billion in 2012 to $28.5 billion in 2015. The US-based research firm cites a September 2011 survey by Tendencias Digitales, which found that 59 percent of Latin American internet users bought products online in the previous year.

“In Brazil, Latin America’s largest e-commerce market, online shopping growth is being driven by emerging C segment consumers, who recently entered the banking market,” says Jean Christian Mies, South American head for Dutch payments processor Adyen. “D + E segment consumers are also starting to do online shopping in Brazil.”

A characteristic of the Latin American e-commerce market is that a high percentage of online purchases – as much as 50 percent in some countries – are paid for using cash-based bill payment services at bank branches or kiosks in stores.

 

DineroMail and MercadoPago

The two largest Latin American providers of online payment services are DineroMail and MercadoPago. Both firms provide stored-value accounts which can be used for online P2P transfers or for paying for purchases on e-commerce sites, auctions and marketplaces. They also provide gateways which enable online merchants of all sizes to accept payments by multiple methods including credit cards, bank transfers, and cash deposits.

DineroMail, which operates in Brazil as DinheiroMail, was acquired by Grupo BuscaPé in February 2011. The World Bank’s International Financial Corporation (IFC) retains the 10 percent stake in DineroMail that it acquired through a $5 million investment in 2009.

BuscaPé, 91 percent of whose equity was bought by South Africa-based media group Naspers in 2010, owns comparison shopping and e-commerce sites in 21 Latin American countries. It owns three other payments-related companies: Colombia-based PagosOnline, Brazil’s Pagamento Digital and payments security firm FControl. Along with DineroMail, these companies form part of BuscaPé Financial Services Group.

“During 2012, BuscaPé plans to consolidate its four payment services businesses into an integrated regional platform,” Marcos Cavagnoli, BuscaPé Financial Services’ vice president, says. Cavagnoli joined BuscaPé in 2011 from J.P Morgan Chase, where he was CEO of its Latin America trade services unit. He was previously an executive in Citigroup’s internet business.

“BuscaPé Financial Services is setting up partnerships with Latin American financial institutions including banks, acquirers and processors, as part of our plans for aggressive growth in 2012,” says Cavagnoli.

MercadoPago is the payments subsidiary of Nasdaq-quoted MercadoLibre, which owns online marketplaces across Latin America. eBay holds an 18 percent stake in MercadoLibre.

In 2011, the total value of payments processed by MercadoPago rose by 88 percent to $1.3 billion from $697.5 million in 2010, while transaction volumes rose by 113 percent in the same period from 6.7 million to 14.3 million. DineroMail processed 8.8 million transactions worth $510 million in 2011.

 

P2P

Osvaldo Gimenez, MercadoPago’s Argentina-based senior vice president, says that MercadoPago offers two types of P2P payments from stored-value accounts in its six markets, Brazil, Argentina, Mexico, Venezuela, Chile and Colombia. “We offer true P2P transfers, where money is sent to friends or relatives, and P2P payments from consumers to individuals or small businesses selling products on marketplaces,” says Gimenez. “Non-purchase-related P2P transfers are a very small part of MercadoPago’s business. The dominant P2P payment that we handle is payments to sellers.”

The core part of MercadoPago’s business is enabling purchases on MercadoLibre, says Gimenez. “We have 67 million registered MercadoPago users, and connections to 50 different payment methods,” he says. These payment methods include Visa and MasterCard, as well domestic-only closed-loop credit card brands such as Hipercard or Aura.

“The second largest part of our business is providing payment services to off-MercadoLibre third-party online merchants. For example, travel and entertainment deals site Groupon uses MercadoPago for collecting all its Groupon payments in Argentina.”

“DineroMail provides e-mail based P2P transfers in our five markets, Argentina, Brazil, Chile, Colombia and Mexico,” says Juan Pablo Bruzzo, DineroMail’s Argentina-based co-CEO. ““If you want to transfer money to someone, or pay a merchant, via DineroMail, you just need their email address.”

Similar to PayPal, users can add money to DineroMail and MercadoPago stored-value accounts by credit card or bank transfer. But, given the high numbers of unbanked Latin Americans, DineroMail and MercadoPago allow users to fund their accounts using agent-based cash collection methods such as Brazil’s Boleto Bancário (banking ticket) or Argentina’s PagosFacil (easy payments). This involves downloading a form containing a barcode from the DineroMail or MercadoPago site and taking it with cash to a merchant who accepts cash-based bill payments.

“Regionally, cash accounts for 50 percent of all transactions taking place on DineroMail, with the remainder mostly being via credit card,” says Bruzzo. “One of the challenges with Latin American credit cards is that they often cannot be used cross-border, even if they are Visa- or MasterCard-branded. But we have processing agreements with large international merchants such as Groupon and Blizzard Entertainment, which means that DineroMail users can use their national-only credit card at these merchants to make cross-border purchases.”

Gimenez says credit cards account for two-thirds of transactions on MercadoPago, with the rest being split between methods such as cash and bank transfers.

“Online P2P transactions represent less than five percent of DineroMail’s business currently,” says Bruzzo. “Our largest revenue stream comes from providing online payment services to merchants. The Latin American P2P market is still really small, as most people who are unbanked and need to transfer money to someone else use an agent-based service such as Western Union. Yet our P2P service is much cheaper and easier to use than a Western Union-style service. Using an agent-based remittance service requires senders to complete a lot of documentation.”

“Domestic remittances within Latin American countries involving migrants in cities sending cash to their relatives cost 10-15 percent of the amount transferred,” says Pablo Montesano, chief marketing and sales officer at Latin American mobile financial services company Wanda.

“Online P2P transfer services are useful to people who don’t have bank accounts,” says Bruzzo. “But there are two reasons why we focus on merchant payments. Firstly, we would need to do a lot of expensive advertising to build up our online P2P business. We would need to create consumer awareness and understanding of how to use DineroMail for P2P transfers. Secondly, our strategy is to acquire merchants because they carry out many transactions each month, but individuals only send one or two transfers a month. We’ve talked to the IFC, which is very involved in P2P services in markets such as Africa, and agreed with them that DineroMail’s primary focus should be merchant payments.”

 

Email billing

DineroMail offers PagoEmail, a service which enables sellers such as private individuals who don’t want the cost of running a website, to bill customers via email. “The buyer clicks on the DineroMail ‘Pay Now’ button in the email, which takes them to the DineroMail website,” says Bruzzo. “They can then opt for any of the DineroMail payment methods, and if they want to pay cash, they just print out the barcode and take it to a cash-collection agent.”

Sellers registered with DineroMail can also email buyers a barcode which they can use to pay cash for a purchase, says Bruzzo. “For example, a seller can advertise an item in a print newspaper, and provide their email address,” he says. “When someone emails the seller to order the item, the seller just needs to email them a DineroMail barcode.”

Around half of the merchants who accept payments by DineroMail are private individuals, sole traders or very small businesses, says Bruzzo.

 

Online bill payments

Neither MercadoPago nor DineroMail offer online bill payment services, although MercadoPago Brazil does provide mobile airtime top-up. “Offering online bill payments involves integrating with billers, which is challenging,” says Bruzzo. “We did try online bill payments in several countries, but it wasn’t easy, so we discontinued the service.”

In Latin America, banks are the main providers of online bill payment services, for example through their online banking sites.

In Argentina, the two ATM networks, Banelco and Red Link, which are owned by different groups of banks, offer dedicated online bill payment services. Banelco’s service is called Pago Mis Cuentas (pay my accounts), while Red Link’s service is called Link Pagos.

“Online bill payment is widely adopted in Argentina among the banked population, but this segment only represents 35-40 percent of the total population,” says Wanda’s Montesano. “The factor limiting the development of online bill payments in Latin America is lack of internet penetration and bancarisation.”

 

Mobile transfers

“Potentially, mobile P2P services could serve as an alternative to bank accounts for unbanked or underbanked consumers in Latin America,” says Neil St. Germain, senior vice president at US consultancy Speer & Associates.

This is the vision of Wanda, the mobile financial services joint venture between MasterCard and Latin American mobile carrier Movistar, which is owned by Spain’s Telefónica. Wanda aims to provide mobile wallet-based services such as P2P transfers, airtime reload, bill payments and point-of-sale purchases to Movistar’s 87 million customers in 12 Latin American countries. Its tagline to consumers is “Wanda, Tu dinero móvil” (your mobile money).

US consultancy Gartner estimates that in 2010 there were 563 million mobile phones in Latin America, with Brazil accounting for just over 200 million, followed by Mexico (91 million) and Argentina (52 million).

“Although PC and internet penetration levels are rising, Latin America lacks the high levels seen in countries such as the US,” says St. Germain. “It makes sense, given the ubiquity of cellphones in Latin America, to offer P2P transfers on wireless devices. Consumers wouldn’t necessarily need smartphones, as you can make purchases and send money using SMS messages on standard cellphones.”

“Smartphones will be a very important payments channel in Latin America in the next one to two years,” says Adyen’s Mies. “In Brazil, there are 19-20 million smartphones in use, concentrated in the A and B segments, followed by the C segment. But there is also good penetration of smartphones among Brazil’s D and E segments.”

According to the Brazilian Banking Federation, FEBRABAN (Federação Brasileira de Bancos), the number of mobile banking accounts in Brazil rose by 71.4 percent  to 2.2 million in 2010 from 1.3 million in 2009.

In early 2012, DineroMail launched a mobile payment service in Argentina, Brazil and Mexico. “I think DineroMail Mobile will actually increase the volume of P2P transfers on our platform,” says DineroMail’s Cavagnoli. “Mobile P2P is very convenient, as people carry their mobile phones with them all the time. To pay a companion via DineroMail Mobile, you just need to enter their email address into your handset and they will receive the transfer on their cellphone. Also, if you are in a store and you want to pay the merchant from your DineroMail account, you can send them an email from your phone.”

 

Xoom

San Francisco-based online remittance firm Xoom launched a mobile transfer service in November 2011 for US smartphone users. “We’re very pleased with the initial response to our mobile platform,” says Julian King, Xoom’s senior vice president of marketing and corporate development. “On average, we’re seeing 15 percent of our US customers migrating to mobile from PCs for remittances to Latin America, and for remittances to Mexico the figure is 20 percent.”

Xoom has priced its mobile remittance service at the same price as its PC-based service – a flat fee of USD4.99 for any amount up to USD3,000.” This contrasts with the USD22 that Western Union charges for an iPhone-based transfer.

“We think that some of our competitors see mobile as a niche service and therefore charge premium prices,” says King. “But we see, based on our customers’ response, that mobile remittances are going mainstream, which is why we offer the same price for mobile and PC internet transfers. Migrants in the US are increasingly acquiring smartphones, which makes them open to mobile remittances.”

In Latin America, Xoom has partnerships with banks such as BBVA; Brazil’s Itaú Unibanco; Mexico’s Banamex; Bancolombia; Guatemala’s Banrural; BCP, Interbank and Scotiabank in Peru; and Citigroup in Central America. Xoom’s customers can fund their transfers from bank accounts, credit cards and debit cards. Recipients can opt to receive funds through cash-pickup at bank branches or agent offices, or through direct deposit to their bank account. “Over 40 percent of our transfers to Latin America go direct to bank accounts,” says King.

“Xoom is on an annual run rate to process over USD2.5 billion worth of remittances in 2012, double the 2011 figure,” King adds.

“Xoom has a great business model, but it is still early days for the company,” says Adil Moussa, a senior analyst at US consultancy Aite Group. “The online remittance market is growing, but it has a way to go. Globally, online remittances represent less than 1 percent of total cross-border remittances.”

Moussa says that, while Xoom saves money by not operating a network of agents in the US, its customer-acquisition costs are high. “There are a lot of costs involved in advertising a service such as Xoom,” he says. “Also, the challenge is to win customers who are internet-savvy and want to do online remittances, and will also do repeat transfers through Xoom.”

 

Key Latin American P2P service launches

January 2012 – Mexican bank Banorte launch m-banking service for unbanked consumers called MiFon in partnership with mobile financial services firm Rêv Worldwide. MiFon allows consumers to send funds via SMS to other mobile users, and to make point-of-sale purchases using a MasterCard debit card linked to their MiFon account.

November 2011 – MasterCard and Spain’s Telefónica announce a 50-50 joint venture to provide mobile financial services to the 68m subscribers of Telefónica’s Brazilian mobile subsidiary Vivo. This is separate from the two companies’ Wanda joint venture.

October 2011 – Citigroup, American mobile carrier América Móvil, and Mexico’s Grupo Financiero Inbursa announce a joint venture called Transfer to offer mobile financial services to unbanked Latin Americans.

February 2011 – MoneyGram and Visa launch service enabling cash remittances to be sent from MoneyGram branches in the US to Visa credit/debit/prepaid cardholders in Mexico. The service follows the 2010 launch of a similar facility for transfers to Visa cardholders in Guatemala.

January 2011 – MasterCard and Telefónica sign an agreement to offer mobile financial services under the Wanda brand to the 87m subscribers of Telefónica’s Movistar mobile subsidiary in 12 Latin American countries.

December 2010 – PayPal Brazil partners with Brazilian mobile carrier Vivo to enable mobile payments to merchants and transfers to consumers via Vivo handsets.

May 2010 – Visa signs an agreement with Bancomer Transfer Services (BTS), US-based remittance arm of Mexico’s BBBVA Bancomer, enabling US residents to send funds from Visa cards over the Visa network to any Visa debit/credit/prepaid card accounts in destinations including Brazil, El Salvador, the Philippines and China. The ultimate aim is to enable transfers to be sent to Visa accounts in any country connected to the Visa network.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Wednesday.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Electronic Payments International