YellowPepper hopes its existing mobile banking relationships in Latin America will give it a head start as it faces off against a number of other companies when bringing its mobile payment platform to new markets.
The banks provide a readymade network of issuer and merchant relationships, said Serge Elkiner, co-founder and CEO of YellowPepper, which is planning an aggressive push of its mobile payment app, Yepex.
Yepex is designed to work with a merchant's existing infrastructure to enable in-app payments, contactless transactions and mobile point of sale acceptance. YellowPepper has about 30 bank clients, and about 5.5 million people use its mobile banking application each month. YellowPepper is also partnering with Citigroup on the Citi Mobile Challenge, a developer program designed to spot new mobile payments and banking innovation.
"For mobile payments to be successful it has to be available everywhere your card is available today, at the e-commerce site, merchant or ATM," Elkiner said.
The Miami-based YellowPepper will begin its mobile payments push in November in Colombia and Mexico (where Banamex already has momentum in contactless payments). It will deploy in Ecuador early next year with other regions to follow.
"For the past few years we have worked in Colombia, Mexico and Ecuador to integrate our technology into the financial system," Elkiner said. These efforts include point of sale card payment and ATM management, which should ease mobile pay deployment, he said.
The company can accept payments via QR code, and it plans to use Near Field Communication in the future when compatible terminals are more widely available in the region.
It will make money through transaction fees from the banks, and income from the merchants in exchange for YellowPepper managing fraud risk. The company uses encryption and tokenization to bring transactions out of merchants' PCI compliance scope.
A number of companies are pursuing the mobile payments market in Latin America, giving YellowPepper and opportunity to play off its relationships with local parties as a competitive play.
Latin America is popular with alternative currency providers, digital prepaid card companies and processors. While mobile is a relatively new channel, it's gradually becoming part of loyalty programs. Carrier-based billing is also gaining a foothold.
In Latin America, mobile technology provides an opportunity to reach merchants, but not necessarily consumers, said Gareth Lodge, a senior analyst at Celent.
"One of the inhibitors for card growth is acceptance points. With mobile point of sale, these barriers are removed," Lodge said. "The word of caution here is the level of consumer banking. Generally, mobile penetration is higher than the percentage of people who have bank accounts. Solving the issue of how to create a mobile payment ecosystem without a bank account therefore is likely to be the key to success."