In early 2016 Peru launched a new mobile payments system called billetera móvil (mobile wallet) or BIM. While there have been numerous mobile payment systems introduced around the world, frequently as rival alliances between competing telecoms and banking players, this particular project stands out for being a collaborative venture between three telecommunications companies and 32 of Peru’s banks and financial institutions.
“What makes Peru different is that pretty much all of the major financial institutions and telecoms companies have come together to use one shared technology,” Jeffrey Bower, a digital finance specialist for Better Than Cash Alliance, a partnership of governments, companies and international organisations based at the UN, which is helping to launch the mobile payment system, told social enterprise and media platform Devex.
A New Model
The Peruvian approach has been to use a single payments platform to attract the country’s unbanked – an estimated 70% of the adult population, according to the World Bank – to begin using bank services. While the platform has been built as a collaborative venture, those who use it will be able to choose from among the services of all member banks. The project has been managed by the Peruvian Banking Association (Asociación de Bancos del Perú, ASBANC), which owns 51% of the operating company and uses an open-loop platform designed by Swedish technology company Ericsson. This means that each member bank remains free to run its own separate system if it desires to do so, which can be linked to the BIM system. This collaborative approach, known as modelo Peru, may help avoid some potentially contentious regulatory issues.
The M-Pesa system that is in use in Kenya, for example, is provided by only one telecoms company, Safaricom, which, it can be argued, is as a result in a position to control the country’s entire digital financial infrastructure. BIM’s three telecoms partners, in contrast, account for approximately 97% of mobile phone users between them but have less individual control. The system will face a number of challenges, such as ensuring strong take-up by the large section of the population that is new to banking and may be initially mistrustful of the concept of making electronic payments.
One of the key objectives of the mobile wallet is to offer the unbanked an easily accessible payments platform, which will allow them to eventually use other banking services, such as borrowing. But Alberto Morisaki, manager of economic studies at ASBANC, told OBG that the platform also offers additional convenience to those who already have bank accounts. Before the system came into use, someone with a bank account who wished to make a payment to someone without a bank account would have to go to a bank branch or ATM, withdraw cash and then pay the cash in person to the other party the next time they met. Now, in contrast, the payment originator can quickly make the transfer on his or her mobile phone to the payee, who can convert it into cash at a BIM-associated ATM; meeting in person is no longer required.
In its first seven months of operation, a total of 155,000 accounts were opened in the BIM system, of which 134,000 were in active use, according to Carolina Trivelli, president of operating company Pagos Digitales Peruanos (PDP). During her presentation at the XVI Latin American Congress of Technological Innovation in Lima in August 2016, organised by the Latin American Banking Federation and ASBANC, Trivelli said most customers were beginning to learn the basics of making and receiving payments, and that PDP would introduce additional services in a phased manner. One priority was to offer a simple system to allow the users to pay for public utilities such as water, electricity and telephone. In addition, work was also progressing to enable users to make tax payments under the category known as régimen único simplificado (single simplified regime) designed for small traders and producers, where they pay standard monthly instalments.
Another significant technological innovation was the launch of an instant-transfer system for bank payments in September 2016. The system is operated by the Electronic Compensation Chamber. Transfers of up to a maximum of PEN$30,000 ($8890) take approximately 30 seconds to complete. Between the launch and March 2017 an estimated 250,000 transactions were completed through the new system, with the month-on-month growth rate running at around 40%. It is estimated that 90% of existing bank transfers are made to move money between different accounts, while the remaining 10% are linked to credit card payments.
The advantage of instant transfers is that they reduce the need to carry cash, with the associated security risks. Most transfers are reportedly made between three of the country’s top banks: Banco de Crédito del Perú (BCP), BBVA Continental and Scotiabank. Other institutions, such as regional and municipal savings and loans cooperatives, known as cajas de ahorro, also make transfers.
As in other countries, Peru is seeing the emergence of a number of small start-up companies developing new financial technology (fintech). Local banks are monitoring these developments, with a view to responding or adapting to innovations as they come into play. At a global level, a number of banks have been showing interest in Blockchain software, also known as distributed ledger technology. First developed by fintech companies specialised in virtual or crypto-currencies, such as Bitcoin, the attraction of Blockchain is that it provides a rapid and secure decentralised payments system. In early 2017 BCP, Peru’s largest bank by assets, confirmed that it had joined R3, the international consortium of more than 70 banks that is working on adapting Blockchain for use across the financial system. Local press reported that Luis Alfonso Carrera, head of business banking at BCP, said bank executives had realised they had an option to observe Blockchain pilots from the sidelines or to become actively involved on an inside track; BCP had decided to follow that second option.
After Brazil, Peru is the second country to have a local bank join the R3 consortium. Scotiabank has also conducted Blockchain trials.
“This technology will be very important to transactional banking at business and corporate level, but without a doubt it will be most disruptive in retail banking. That is where we must have the greatest sense of urgency,” Ignacio Deschamps, group head for international banking and digital transformation at Scotiabank, told local media in February 2017.