A major level of mobile phone penetration provides huge potential for mobile banking and payments in Latin America.

Latin America has the fastest rate of smartphone adoption in the world, which has caused mobile apps to skyrocket in popularity and growth. This smartphone boom is in part due to the wider growth of Latin American economies as well as a population of 158 million millennials. In fact, for every 10,000 people, growing countries such as Mexico, Chile and Colombia may only have one bank branch and one ATM but 5,100 mobile phones.

When we hear “unbanked” and “underbanked” we tend to think of populations that are underserved, rural, poor, and outside of the developing world. But the fact is 7.7% of US households were unbanked and 20% were under banked in 2013, according to the FDIC.

However, the reason we connect these terms with underserved countries is because according to McKinsey research, 2.5 billion of the world’s population do not use banks or microfinance institutions to save or borrow money. But an underserved banking population doesn’t mean they are un-servable. Financial services and mobile payments for the unbanked provide the most promising opportunities for both mobile providers and banks to offer added convenience to existing customers in every country.

As more consumers embrace digital technology for simplifying daily tasks, the banking industry is challenged to develop mobile banking and payment apps that are faster, safer and easier for consumers to use.

This is especially true since smartphone adoption already accounts for record numbers in the region, with Mexico expected to end 2015 with over 34 million smartphones, Colombia with over 16 million, Argentina with over 12 million, Chile with over 11 million, Peru with over 7 million and Brazil close to 50 million. That’s a huge population who can make use of their smartphones to access financial services.

However, banks are struggling to provide these purely mobile services, since their core business is still in their large branch networks where they have large sales forces. Their online channels are still a minor part of their business and used mainly for information purposes as an online process. Using mobile services for account openings is virtually non-existent. Security issues also play a role in the minds of Latin American banking clients, but are being left aside by the younger generations who are digital natives and have embraced e-commerce and digital payments as part of their life.

Similarly to what’s happening in the U.S. and Europe, issuing banks will need to adapt fast to keep pace with the changing needs of these digital native generations. New startups continue to enter the market with valuable propositions to improve payment experiences as well as customer experiences.

The bottom line is issuers have to rely on their apps as a key channel of communication and transaction with consumers. Latin American banks will also need to react fast and follow these developments to continue to grow and increase availability of the desired features and functionality of mobile apps that consumers are increasingly looking for. 

Sergio Chalbaud is CEO of Fintonic.