Publish in Perspectives - Wednesday, March 23, 2016
Mobile banking penetration in Latin America, according to eMarketer.
Mobile banking has strong potential, but is still not common in Latin America.
BY FINANCIAL SERVICES ADVISOR
Mobile banking in Latin America increased 8 percentage points last year as compared to 2013, according to a report by security provider Easy Solutions. According to the report, 47 percent of those who conducted no mobile banking cited fear of fraud as their reason for not conducting transactions with their mobile devices. How important is mobile banking to Latin American financial institutions, and how much is the technology helping to boost profits? Do Latin American financial institutions have adequate security safeguards to protect their customers? Will growth of mobile banking in the region continue at its current pace?
Luis Chipana, analyst at Celent: Apps help move transactions away from higher cost channels, which has been the banks’ strategy since the appearance of ATMs. Digital, particularly supported by mobile banking, is also a reaction to better serve millennials, who will be an important segment of customers in the future to come. Bankaool in Mexico and Banco Galicia in Argentina with their Move digital offering to young university students is a good example of this. In 2015, Celent conducted research looking at the apps of the top 10 Latin American banks, and found that all of them except one offered an app. The one that didn’t now currently offers a mobile experience through Web responsive design. iOS and Android are the preferred platforms, with a few banks offering apps for Blackberry and Windows smartphones. Most of the banks offer apps in more than one platform, though not the same functionality across them, mainly due to prioritization and resource limitations. The most common functionality includes account information, bill pay, transfers, location services, customer service, important links and fidelity programs. Latin American banks are also taking advantage of mobile as they implement electronic wallets to target unserved or underserved segments, with financial inclusion in mind, but also as a means of digitalizing payments. Simplified accounts, deposits, withdrawals, money transfer and bill payment are some of the features available. Celent expects in the near future in Latin America to see mobile banking incorporating features around gamification, voice recognition, social media, personal financial management tools, and remote deposit capture.
Melissa X. Diaz, associate attorney, and Arti Sangar, partner, at Diaz, Reus & Targ, LLP: Given that Latin America boasts a fast-growing population of smartphone and tablet users, mobile banking in the region will soon be a necessity rather than just an option. Financial institutions in Latin America are also very keen to gain a good return-on-investment by adopting mobile banking as the default channel for banking. Most international banks have already developed advanced technology to protect customers’ accounts, including effective ways to track suspicious activities for this new channel.
It is expected that local banks in the region will also adopt the same standards to evolve rapidly to match up with the demand for mobile banking. Clearly, banks in Latin America, like many other emerging markets, should consider adopting mobile banking to transform their business models and boost their profits and customer satisfaction. On the face of it, all the conditions appear to be in place, but banks have yet to demonstrate an understanding of the new technology to those who are currently unbanked, or use other remittance channels. Additionally, because the existing laws were made to facilitate the traditional paper-based business environment, the current legal environment in Latin America is still inadequate for mobile banking. Governments and financial regulators would therefore need to collaborate to establish the necessary oversight and supervision frameworks to ensure that security and privacy concerns of the users are adequately addressed, and customers are protected against abuse and fraud.
Additionally, legislative policies, including consumer protection frameworks, need to be aligned to encourage customer acceptance of this novel financial product. Despite all the challenges, we can expect that the dust will eventually settle down, allowing for Latin America to further open up to mobile banking.
Beatrice Rangel, director of AMLA Consulting in Miami Beach: Mobile banking is proving to be the answer to low rates of banking usage in emerging markets in general and in Latin America in particular. With only 48 percent of Latin American consumers having bank accounts, financial institutions have a real opportunity to acquire customers. As all consumers in the region become increasingly digitized, banking will certainly grow through digital means.
Indeed, the growth in online users from 2000-2009 in Latin America was 883 percent, according to Havas. And while security is a serious concern, as more applications come into the market to prevent hacking or data prowling, consumers—particularly those deriving their income from informal activities—are putting these concerns to rest.
What I believe to be lacking is more dynamic and assertive marketing campaigns on the part of banks and financial institutions to attract the continuously growing demographic of middle class consumers in the region.
Campaigns that reach consumers through digital means with financial education content and free mobile banking applications could prove to accelerate what seems to be the chosen way of emerging middle classes in the region to step into modernity.
Wally Swain, senior vice president for emerging markets at 451 Research in Bogotá: The statistics are probably more dramatic if broken down between Brazil and the rest of Latin America. Brazil has had mobile banking services for many more years than the rest of the region and so its adoption has to be much higher. Maybe Brazilians have less fear for being more familiar, but I think there is still a solid core of skeptics throughout the region about the security of mobile transactions. Much mobile data usage in Latin America is over public WiFi, and there are always concerns about the security of such transmissions. Banks plead with customers to use their Internet platforms even over secure WiFi and fixed broadband, but the lines are still long outside bank branches at the end of the month. And security may not be a concern about interception, it may be a concern that the other side of the transaction pockets the money and still claims the bill wasn’t paid.
In the bank, there is a comforting piece of paper that is machine-franked or even with an old fashioned rubber stamp that says ‘Paid In Full’. Banks probably have enough security machinery in place. They may need to advertise it more (in a subtle way) so that awareness increases. But issues may be generational, and only time will fix that.
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