Mobile payments landscape in Latin America

1. Mobile Payments in
Latin America
Landscape and Opportunity
August 1, 2013
Mobile Payments in Latin America - © 2013, All Rights Reserved, Paytroniks

2. Opportunity
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3. Key Business Drivers in the Region
Mobile Deployment:
• Close to 100% mobile penetration
rates.
• Brazil is fifth largest mobile phone
market in the world, with penetration
rates of 130%.
• Brazil also ranked highest in mobile
readiness in LAC Region. (MasterCard)
• In general, solutions struggling to gain
foothold.
Payments:
• All major payments schemes are well
established and experiencing positive
growth.
• MasterCard reported in January
increase in volume of 18.5% for 2012.
Socio Economic:
• D & E socio-economic segments
increasingly rely on “community
banking”.
• Users of mobile banking services will
skyrocket from current number of 18
million to 140 million by 2015. (Felaban)
Technology:
• 4G networks appearing but adoption is
slow.
• NFC enabled phones have limited
penetration so far in the region.
• Perceived lack of security for financial
data on phone remains a significant
consumer barrier for mobile payments.
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4. Sampling of LAC Mobile Initiatives
As in other regions, commercial ventures in mobile payments continue to emerge/develop
Santander: Samsung and Banco Santander announce NFC pilot in
Chile in April. Press release states that objective is for 5000 terminals
to be enabled with NFC and a commercial roll out by end of 2013.
Wanda: JV between MasterCard and Telefonica announced in 2011
for development of mobile solutions in 12 countries with the
exception of Brazil. So far have launched only in Argentina.
Oi Paggo: Oi recently announced the roll out of a prepaid card as a
companion to its closed loop Oi Paggo mobile payment service.
Solution is accepted at all Cielo enabled merchants.
Clip: Mexican start up recently received $1.5 million in funding.
Claims that solution accepts Visa and MasterCard payments. Long
term plans to eventually expand into the United States.
Other Initiatives in the Region: I2C partners with Utiba; TIM
Brasil CEO steps down in February; NFC trials in Brazil; PayPal
launches new service in Chile.
Source: Internal Analysis
Mobile Payments in Latin America - © 2013, All Rights Reserved, Paytroniks
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5. Changing Payments Landscape
World-wide trend
Traditional Payments:
Consumer: Bank (Issuer)
provided plastic card
Traditional Payment Schemes:
Visa
MasterCard
Amex
Merchant: Bank (acquirer)
provided traditional POS terminal
New Payments:
Consumer: still mainly plastic but
emerging contactless initiatives
and mobile wallets.
New Players and traditional Schemes:
PayPal
Wanda
Clip
Merchant: seeing emergence of
mobile (phone and pad) as POS
devices.
Mobile Payments in Latin America - © 2013, All Rights Reserved, Paytroniks
Visa
MasterCard
Amex
Telefonica
Mobile Operators
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6. Paradigm Shift - Acquirer Landscape
Latin American Trend
Figure 1
Figure 3
Figure 2
Expand value proposition
Acq # 2
Acq # 3
Past Acquiring Structure
•
•
•
Acq # 1
Acq # 2
Acq # 3
Current Trend
Figure 1: Past acquiring structure consisted of
payment franchise offering exclusivity to one
acquirer.
Figure 2: Currently, payment franchises
eliminating exclusivity and opening up franchise
to several acquirers in one country leading to
commoditization of services.
Figure 3: In order for acquirers to differentiate
themselves from the competition, they are
beginning to incorporate other payment brands
and value added services to their value
proposition.
Differentiators
Acq # 1
•
•
•
•
•
•
Acq # 1, 2 & 3
Future Trend
New acceptance payment brands.
Expansion into non-traditional merchant segments,
i.e. bottom of the merchant pyramid activities.
Promotion of emerging technologies: Bill payment,
micropayment, mobile, and e-commerce solutions.
Enhanced reporting capabilities and data mining at
the POI.
Robust offering of loyalty and incentive programs.
Enhanced solutions involving recurring and
installment payments at the POI.
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7. Paradigm Shift – Strategic Implication
Viable Mass-Adoption Strategy
Adoption Steps / Progress
2
1
Credit and
Debit Cards
4
3
Mobile POS
Non payment
mobile
applications
Mobile wallet
+ prepaid
card
Green = areas of greatest perceived
value by end-users
Conclusion: Mobile is a vehicle for expansion of POS network (near term)
and mass adoption of prepaid (long term).
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8. Prepaid – Regulatory Overview
Regulatory Assessment
LAX
STRINGENT
• Mexico: One of the stringiest regulatory environments in the Latin American
Region.
• 1-1 Bank to retailer relationships. Green Dot business model not possible
in country.
• Authorities have substantial leeway in interpreting regulations.
• Brazil: Not as stringent as Mexico. Regulators open to interpreting grey areas
with input from business community.
• Panama: Well established banking laws and a 25 year history of financial
stability permit viable prepaid card solutions.
• As a general rule of thumb, the larger the market, the more stringent the
regulation towards prepaid card products.
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9. Mobile POS – Strong Value Addition
• POS systems continue to be expensive in most
Latin American countries. Mexico only 400,000
merchants out of 5.5 million accept cards.
• Obtaining merchant account and equipment is
long, costly, and tedious process.
• Square has a strong value proposition in this
market. However, challenges remain:
• Phone has to be fairly sophisticated to use
Square service.
• Challenge in countries were large segments
of the population remain unbanked.
• Local clones starting to appear:
www.clip.mx
• PayPal making inroads in Latin America, but key
is use service without internet connection.
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10. Barriers to Entry of NFC in LAC
• NFC will require upgrades to POS
infrastructure, which retailers will have
little appetite to do so due to costs and
lack of NFC enabled smartphones.
• A QR solution or NFC enabled sticker
may be more viable.
• Pro: can be adapted to more
phones.
• Con: Investments in POS and
acquirer infrastructure still needed.
• Prognostication is that technology will
take at least 5 years to become relevant.
• NFC may become more popular in niche,
closed loop environments.
• Monedero synopsis.
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11. Quantifying the Opportunity
Payment Franchises Perspective
• Current LAC Market - over 650 million Visa and MasterCard plastics: 325 Million
•
Visa / 285 Million MC.
Over $500 billion in transaction volume. Estimate $1.5 billion in revenue for Visa /
MC or 30 basis points (.3%).
 Mobile Payment Solution opportunity extrapolation
 Assumptions
 Mobile payment solution launched today has gained foothold in market in
2014 with a .1% market share in the LAC market.
 $50 Average Revenue Per User (ARPU) per year.
 Revenue scenarios
 .1% plastic market share = 65K users x $50 ARPU = $3.25 million in revenues.
 Or another way to look at opportunity, for every $1 billion processed, this
results in $3.25 million in revenues.
Sources: MasterCard, Visa, Internal Analysis
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12. Quantifying the Opportunity
Sanity Check - Square
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13. Mobile Payments in
Latin America
Landscape and Opportunity
August 1, 2013
Mobile Payments in Latin America - © 2013, All Rights Reserved, Paytroniks