There is hope for the thousands of middle and low-income Brazilians who are currently demanding better services from their government. Last May, just as the protest movement was getting started, the Central Bank of Brazil issued the much awaited medida provisoria (MP) for mobile payments. The bill establishes the regulatory framework to allow non-bank eMoney issuance; and while at the moment it is only a general directive that defines what constitutes a payments scheme, which actors can be involved (MNOs, digital wallet providers, card companies and merchant acquirers), and the ability of the central bank to regulate such schemes, it is already paving the way for a number of commercial partnerships to go to the market.
In the eyes of the financial inclusion community, Brazil is seen as a global leader in branchless banking, with one of the most extensive agent networks in the world. However, 86% of its population is urban and some estimate that tens of millions of people live in urban areas with low-quality financial services, if any at all. In addition, when it comes to mobile payments, it has been a sleeping giant, trailing behind countries like Colombia and Mexico which have seen already a number of banks, MNOs or joint-partnerships launch innovative mobile financial services.
But what does this new bill really mean for Brazil’s 260 million connections: the fourth largest mobile market in the world and the largest in Latin America?
Partnerships and pilots are in place, the environment is generally positive (protest movement aside), and consumers appear willing to try mobile payments. According to Mastercard’s m-readiness index, 19% of Brazilians are willing to try mobile financial services. The mobile communications sector in Brazil is highly competitive: The largest operator, Vivo, has a market share of 29%, followed by TIM (26%), Claro (24.5%) and Oi (18.5%). All four have officially developed some form of MFS solution.
- Vivo formed a joint venture with MasterCard and went live right after the MP went into effect under the name of Zuum, becoming the first MNO to go to market. Zuum is now available in five cities in the state of São Paulo (Osasco, Sorocaba, Mogi das Cruzes, Jundiaí and Guarulhos) and in Belo Horizonte, capital of the state of Minas Gerais.
- Claro and Bradesco formed a partnership in October 2012 and announced plans for a mobile wallet in Q3 2013 and transactions via NFC in Q4. CGAP was directly involved in this project through its API work. (Click here and here for more details)
- Oi, Brazil's fourth largest operator has furthered it partnership with Banco do Brasil and Cielo to launch Oi Cartera, a wallet that allows users to make purchases in establishments that have teamed up with Cielo, one the largest acquiring networks in the country.
- TIM announced a similar service following an agreement with Caixa and MasterCard in January 2013 to be available by 2014.
From conversations at the Central Bank, we have learned that one of the objectives of the payments bill is to create the "lightest" possible mechanism in terms of regulatory burden for commercial players, hoping it will translate into cheaper products and payment instruments that will reach low-income customers. What is becoming evident is that when it comes to regulation Brazil seems to be taking the same path as Peru, (as opposed to Colombia and Mexico) as my colleague Xavier Faz blogged about recently.
To the relief of some, interoperability will not be mandated, but it is signaled as a goal further down the road, and any new service which receives a license will be required to have a clear roadmap of how it will eventually interoperate with the wider financial ecosystem. This bill is the result of a 7 year-discussion between market players, government ministries and international institutions such as CGAP. It took effect immediately after publication, but to become law, it must be first approved by Congress. (Click here for more information on the timeframe).
The question that remains is how much impact will this medida provisoria have on financial inclusion? Perhaps the ones who will benefit the most will be online and mobile payment providers such as PayPal, PagSeguro; and startups such as Zoop, Akatus, and GoPay that are enthusiastically looking into opportunities in this space.
------- The author is part of the Technology and Business Model Innovation Team at CGAP.
Enjoyed the post.
Just a quick question regarding the statement, "To the relief of some, interoperability will not be mandated".
Is interoperability not a positive for the development of a mobile financial ecosystem? Who would the 'some' be in this scenario?