Announcements

Building 21st Century Broadband Infrastructure in Jordan

December 6, 2010
Amman, Jordan

Mobile Money Brazil (MMB)

August 25 and 26, 2010
São Paulo, Brazil

TechPolis organized, in partnership with SGoldstein Consulting, the conference “Mobile Money Brazil” in São Paulo at the American Chamber of Commerce (AMCHAM) on August 25 and 26, 2010. Attracting 150 attendees from Brazil, Latin America and the United States, the  influential two-day conference focused on the fast-moving mobile money market in Brazil, as well as on international experiences relevant to Brazil.  Industry-leading speakers included Gilberto Caldarte, the president of Mastercard Brasil and Roberto Rittes, managing director of Oi Paggo.  Once considered a laggard until in financial transactions over mobile phones, Brazil is quickly catching up.   Only 40% of Brazil’s 195 million-strong population has a bank account.  Alliances between mobile operators and financial institutions are beginning to emerge, demanding technology solutions and new business models and making Brazil the hottest Latin American market for financial transactions over mobile handsets.  

Only 40% of Brazil’s 195 million-strong population has a bank account. Alliances between mobile operators and financial institutions are beginning to emerge, demanding technology solutions and new business models and making Brazil the hottest Latin American market for financial transactions over mobile handsets.

“For Brazil, 2010 is the year of mobile banking,” said Ricardo Tavares, CEO of TechPolis, a global mobile telecommunications and technology management consulting firm. “Brazil has a sophisticated banking sector and a dynamic mobile market that is approaching 100% penetration and remains hungry for innovation. In today’s Brazil, ATMs and the Internet are already more popular than writing checks or visiing bank branches for fnancial payments and other transactions. After starting slowly as expected, the mobile money marketplace will scale up quickly in the next couple of years. This year is the big bang when it will all start.”

“All major banks are already actively engaged in mobile money partnerships,” said Sergio Goldstein, principal at SGoldstein Consulting, the top independent Brazilian expert in mobile financial transactions, consulting with banks, mobile operators and technology platform suppliers. “This year is critical because of first-to-market advantages. Mobile money has a proven business model worldwide, both for banked and unbanked customers, and Brazil has a high population in both segments. The complex nature of the market, though, makes the right strategy essential for success. Mobile Money Brazil will discuss what all the big players are doing and what strategies are most likely to work in Brazil, referenced on international experience.”

The Future of Mobile Money in Brazil
Published in Telesíntese, a Brazilian telecom digital newsletter
Tuesday, July 13, 2010 – By Sérgio Goldstein and Ricardo Tavares*

The mobile phone will be at the center of financial transactions in Brazil in the coming years. What remains to be seen is how quickly mobile money projects will be implemented and the final scope of the business alliances that will lead them. Business alliances are critical for the mobile money marketplace to flourish, as it depends upon two independent ecosystems—the mobile communications industry and the financial system. Also, government plays an important role in Brazil in this field, as a regulator, a player in the financial system through state-owned banks, and as a major provider of income transfer programs to the poor, most of whom do not have bank accounts.

Mobile money is already becoming a reality in Brazil. Oi Paggo—the mobile money venture of Oi, the largest multi-services operator in Brazil—is the pioneer. It has developed a credit card-like platform to focus on the emerging middle class that is growing in Brazil as the economy adds jobs and incomes rise (the so-called C class). This segment is lacking access to credit cards and Oi has targeted it. Oi Paggo possess over 150 million clients, concentrated in Brazil’s Northeast, where Oi enjoys a mobile market share of about 40 percent, double its national average. Oi Paggo is fully controlled by Oi so far, with the operator owning a credit card license and issuing credit via its mobile platform.

Meanwhile, Vivo—the largest mobile operator, with 30 percent nationwide market share—also has launched mobile money initiatives in partnership with banks and credit card companies. Recently, Vivo set up partnerships with Bank Itau (the largest private bank in Brazil) to offer a co-branded credit card. Mastercard and Vivo have also partnered with Bank Bradesco to use the mobile phone as a credit and debit card through a bonus bank account that charges a monthly bank fee and then turns it into pre-paid credit. Claro, the second largest mobile operator, launched a similar bank account scheme with Bradesco and is also doing a trial of contactless payment transactions via Near-Field Communication (NFC), a short-range high frequency wireless communication technology that enables the exchange of data between devices. TIM Brasil is also in the process of articulating its own value proposition in mobile money.
Despite all of these initiatives, mobile money is still in its infancy in Brazil. The benefits to consumers are self-evident. But in Brazil this is a highly segmented market.

For post-paid mobile users (about 20 percent of the population, made up of the so-called A and B classes), mobile money means connecting bank accounts and credit cards to the phone to confirm transactions using a password, representing an extra layer of security. Mobile banking is already offered by all major retail banks in Brazil and is used primarily to obtain account balances. A series of new services for this segment is beginning to be offered to facilitate mobile payments, led by credit card flags (Visa Mobile Pay) as well as intermediaries (Foneshop, Redecard).

The C class is a segment that is transforming Brazil into “a middle class country.” The mobile phone is a major force to bring this segment into the credit card world. Oi Paggo and Novo e-Pay are examples of credit card transactions going mobile. The competitive dynamic in the credit card industry in Brazil positions mobile communications as an ideal platform to increase market penetration, expanding innovative services for consumers and merchants.
But perhaps the most important contribution of mobile money to Brazil is the possibility of financial inclusion for the D and E classes, the bottom of the social pyramid. In Africa and Southeast Asia, an underdeveloped financial system left the field open for mobile operators to emerge as key partners in providing universal access to banking transactions. In Brazil, where the banking system includes 50 percent of the population, there is a perception among bankers that special accounts for the poor, with lower tariffs, will bring the unbanked half of the population to the financial system over time.

In fact, what we have learned from Africa and Southeast Asia is that social segments with very low incomes are not natural customers of traditional banking. At the same time, the poor are very familiar with pre-paid mobile phones that are the basis for mobile money platforms. As Brazil reaches 100 percent mobile penetration this year, mobile will become critical to financial inclusion. The costs of maintaining traditional bank accounts, even if slightly modified, are simply prohibitive for the very poor.

The mobile phone, therefore, is a critical element for financial inclusion. The government of Brazil is beginning to understand that. Brazil’s Central Bank, as well as several ministers and federal government agents, would be wise to use the mobile phone platform to expand digital inclusion, as Brazil’s economic and social prospects continue to improve. Dialog among all players in this new value chain—mobile operators, banks, credit card companies and their intermediaries, and government—is essential for a significant increase in mobile money transactions to take place in Brazil in the near term.