How Peru built the mobile wallet that other nations are starting to copy
Many countries are seeking to emulate Peru’s BIM mobile wallet, Latin America’s first interoperable national mobile money scheme built on the cooperation of rival banks and telcos.
The way in which the Peruvian government, regulators, financial institutions, and telcos were able to cooperate to build Billetera Móvil, or BIM, is seen as a model for other national mobile payment schemes. But a challenge for governments and banks in emerging countries is persuading consumers and small businesses to move from the informal cash economy to electronic payments.
The benefit for consumers is access to the banking system; mobile money schemes offering smartphone-based banking and payments services are a proven way to generate financial inclusion. The best example is Kenya’s M-Pesa, which succeeded because its operator, Vodafone-owned Safaricom, is Kenya’s dominant mobile carrier.
That example can't be easily copied in countries where there are multiple stakeholders — in the U.S., for example, the growing list of failed interoperable schemes includes the telcos' Softcard, the merchants' CurrentC and the cross-industry Plenti.
In Latin America, there is a fragmented market with a range of competing mobile money services.
In 2010 and 2011, respectively, the two main Latin American telcos, Spain’s Telefónica, partnering with Citi, and Mexico’s América Móvil, partnering with Mastercard, announced rival mobile payments schemes in various countries, and they were followed by a number of other entrants around the region.
These Latin American schemes didn’t attract significant volumes, as they couldn’t scale. From a consumer perspective, not being able to send money to someone because they have a mobile wallet with another mobile network is a major deterrent to adoption.
It took Peruvian legislation — 2013’s Ley de Dinero Electrónica para la Inclusión Financiera (Electronic Money Law for Financial Inclusion) and a concerted effort by Peru’s banks, cajas (credit unions), microfinance institutions, licensed nonbank e-money issuers, and telcos — known as the Modelo Perú initiative — to create Latin America’s first national domestic mobile money network.
Peru's Electronic Money Law allows nonbanks to participate in financial services and offer banking products, highly important in a country where only 30% of the population has bank accounts. BIM is intended for anyone without a bank account, although it is also available for banked consumers.
In 2014, Peru’s national banking association ASBANC (Asociación de Bancos del Perú) created a company, Pagos Digitales Peruvianos (Peruvian Digital Payments/PDP), to manage Modelo Peru.
PDP’s first step was to select Swedish telco Ericsson to provide its mobile money software for Modelo Perú’s BIM platform, which finally launched in February 2016. BIM, which is supported by 30 financial institutions and e-money issuers plus four telcos, offers services such as P2P transfers, savings accounts, access to loans, cellphone top-up, and tax payments.
"Modelo Perú was the first mobile money scheme globally to bring together so many institutions in a partnership to design an interoperable platform focusing on delivering the basic banking services for financial inclusion,” said Jeffrey Bower, principal of Bower & Partners Consulting Services. Bower provides advisory services for the project.
“Initially, the goal was for the FIs to collaborate in order to compete with the telcos, but eventually the telcos were invited to become partners in the process,” Bower said. “Led by Peru’s former minister of social inclusion and development, the initiative created a platform that works across all types of financial institutions, from formal to fintech.
“The concept heavily influenced the design of the Bill & Melinda Gates Foundation's Level One Project principles, which have since influenced the design of many payment platforms at a global level," Bower continued. "Peru showed this level of collaboration was possible, and demonstrated a viable path to achieving a collectively designed outcome. Several countries such as Ecuador, Argentina, Colombia, Mexico, Nigeria and Pakistan are now pursuing this approach."
Jordan has designed a collaborative scheme similar to Peru’s BIM, Bower said, while Argentina just launched an interoperable platform named PIM. Pakistan and India have similar models in the works.
In Peru, as across Latin America, small merchants, known as agents, provide cash deposits and withdrawals and other transactional services on behalf of banks.
"Recent additions to BIM include connecting BIM to our member banks’ agent networks," said Miguel Arce, PDP’s commercial director. "We’ve also added bill payment, and now provide ATM withdrawals from BIM wallets via two of our member banks’ ATMs. Also, we’re connecting BIM to one of Peru’s two card processing networks, which comprises 100,000 POS terminals, and have just added Peru’s fourth main telco to BIM."
PDP is building a network of retail agents known as BIMers who have a smartphone acting as a mobile point-of-sale device that can be used for cash in and cash out and selling airtime top-ups to customers. The BIMers’ role is to promote the BIM platform across the country in areas where there is a lack of banking service, Arce said in a recent oped.There are currently 5,000 BIMers, with a goal of doubling that number by the end of 2018, he said.
Within the next month, PDP plans to offer the ability to make BIM payments via social networks. "Offering BIM on social networks is likely to really boost our adoption," Arce explained.
Every few weeks, PDP gets requests from payment schemes in other countries to help them develop an interoperable mobile money system. "The requests come from all over the world, for example, from countries in Africa, not just Latin America," Arce said. "We worked with the payment systems in Argentina, Ecuador, and Paraguay to develop interoperable mobile money schemes."
The number of BIM wallets is increasing by 10,000 a month and currently stands at 430,000. Arce says that the number of monthly BIM transactions will reach 500,000 by July, with the goal of reaching 1 million a month by December 2018. Three of the four largest Peruvian banks are now connecting their mobile and Web banking services to BIM.