For the last decade, year-on-year the payments industry has predicted the shift of mobile payments to the mainstream.
The fact that the uptake of mobile financial services is finally experiencing a global surge is no longer under debate, however some regions are more equipped to rollout widespread engagement initiatives than others.
Enter Latin America, where countries like Peru, Costa Rica, Mexico and Brazil are all taking measures to ensure the interoperability of their payments systems by leveraging the mobile device as a means of reducing the heavy reliance on cash.
As a BRIC country, Brazil is one of the fastest growing payments markets in the world, with the most developed card market in Latin America and boasting 70% of the total ecommerce transactions in the region.
While the government has been actively involved in financial inclusion initiatives, there is still a high population of unbanked consumers at 65 million adults. According to Mercator Advisory Group, more than 40% of the country’s population is currently under the age of 24 and it has the sixth largest population in the world. Though still technically falling under the developing country status, this combination of factors, twinned with a growing economy and relatively new technology infrastructure, makes Brazil an exciting contender in the payments market.
There are more mobile phones in Brazil than people, with 272.4 million subscriptions amongst a population of 199 million (Anatel/Teleco) making it the fourth largest mobile market in the world (GSMA). Despite the extensive mobile device penetration and substantial unbanked population, mobile payments have been relatively slow to catch on.
This is all set to change in the next couple of years. While the payments landscape has been likened to that of Kenya pre-MPesa, Brazil has a set of unique qualities that could lead to it taking the mantle in leading the mobile banking space.
Aside from a young, tech savvy population and increasingly favorable economic conditions, Brazil also boasts new regulations that encourage competition within the mobile payments space (for both mobile providers and payment services providers); creating a system of interoperability with the fees and commissions carefully overseen by the Central Bank. Add to the equation that smartphones outsold feature phones for the first time in 2013, and that Visa is pushing contactless technology for the 2016 Olympic games, and Brazil is looking set to take a very different route into the widespread adoption of mobile payments than Kenya.
The smartphone route into mobile adoption will undoubtedly see a slower penetration rate than the path of feature phones, as it is a much more costly initiative and will rely on merchant uptake. However, there has been a heavy emphasis on NFC and contactless in the region, with the rollout of numerous pilot projects and this is set to continue.
This ongoing concerted effort between different players in the mobile payments space to make the infrastructure primed for large scale consumer acceptance means that the future of payments in Brazil could be much more weighted towards the mobile than any other payment method. When it comes to mobile, it is not a question of if, but when, and Brazil is undoubtedly the country to watch.