Latin America Experiments with Mobile Banking
Latin America has surpassed 100% mobile phone penetration, according to the latest data from World Bank. In reality, about 30% of the population still doesn’t have a phone. (Urbanites with more than one phone inflate the number.) Still, adoption is strong and growing.
It follows that banks in Latin America have been embracing mobility: releasing feature-rich mobile apps primarily, and also updating online banking offerings and targeting the unbanked and underbanked.
Throughout 2012, smartphone apps emerged as the preferred channel, even as the vast majority of the population still relies on feature phones with limited data capabilities. Android and iOS devices are growing in popularity, thanks to operators actively marketing them with offers and competitive monthly plans. The enthusiasm for mobile apps held true for leading financial institutions throughout the Latin American region, where it ranked in priority over reaching out to the unbanked.
That’s not to say that Latin American banks are ignoring those outside the traditional banking system. Rural banks and most microfinance institutions continued to offer rudimentary banking services via SMS. Mass market-focused financial institutions, such as Davivienda in Colombia and Caixa Economica in Brazil, targeted the unbanked with mobile wallet solutions.
It’s also important to note the other reasons driving interest in mobile apps: security considerations, the general lack of a viable USSD alternative, and the frequency with which mobile operators dramatically increase the cost of SMS messages. In some countries, banking regulators’ insistence on the use of a second authentication mechanism (2FA) for SMS banking transactions—in some cases involving IVR callback—is also driving banks to take the app route.
The apps themselves are becoming more ambitious. Many banks are using mobile to cross-sell new products and give consumers the opportunity to apply for, and receive, on-the-spot credit line increases.
Cardless ATM cash-out is another innovative service growing in popularity. It enables consumers who receive funds via P2P transfers, but who are not existing bank customers, to get their funds via ATM networks. At the same time, services such as remote deposit capture, a popular feature in the U.S., are notable absent in Latin America, due to regulation, not lack of interest on the part of either banks or consumers.
In the midst of all the rush to develop apps, banks have also realized that the mobile channel is not easily monetized. It was originally seen as a means for reducing service costs, and only recently, as a new way to help banks increase revenue through cross-selling products. In the cardless ATM cash-out option, banks with significant physical presence are looking to reinforce that differentiation through seamless integration with their mobile offerings.
In parallel with mobile development, banks are reexamining their Internet banking, aware that advanced mobile solutions could highlight deficiencies in their online offerings. We saw a number of new Internet-focused projects kick off in conjunction with app-focused mobile projects in 2012. While the majority of initiatives had the consumer in mind, Latin American banks are increasingly targeting corporate customers with enhanced, integrated Internet banking and app-driven mobile solutions.
At least for the time being, Latin American banks have identified the mobile app as their key tool for reaching current and future customers.