Technology for Good
All over the country, Peruvians, who for centuries have been transacting in cash, can now access digital financial services right in the palm of their hands. The service, called “Bim,” enables any Peruvian with a mobile phone to open a bank account and make payments. This can be done without ever having to visit a bank.
To many of us, sending money to friends and family and paying your bills may not seem like a big deal. But for the poor, the amount of time, energy, and money spent completing transactions is significant and, for people with limited funds, it is beyond acceptable.
Peru is a country where, despite all the best efforts of banks and the like, formal financial services have only reached 30 percent of the population. Thanks to Bim, the expectation is that in five years, five million people will use the service, significantly increasing access.
While the technology from Ericsson behind these services is as powerful as it is impressive, the real story is about how a diverse set of financial services organizations, normally fierce competitors, were able to work together to offer a service that will attract new users to formal financial services. In what seems unlikely, altogether 32 financial institutions in Peru cooperated and shared resources to build a payments platform designed to bring more people into the formal financial services system.
Instead of competing, the entities in Peru saw the value of cooperation, forming deep partnerships through the Peruvian bankers association ASBANC. Instead of spending resources building their own systems, they jointly invested and built just one together with Ericsson. Instead of fighting over customer ownership, they shared access to agents, branches and ATMs. Instead of competitive marketing campaigns and mixed messages, they worked together under a new brand to attract their individual target customer segments to the new common payment product.
Taking the best lessons from other implementations around the world, the Peruvians worked together to build a solution for mobile financial services designed to combat the major challenges of delivering financial services to the poor: reach scale, ensure liquidity, and design a product able to attract people away from cash. This was no small task. Many details needed to be worked over and over again. After much effort, the result is Bim – the world’s first interoperable mobile digital financial services system focused on financial inclusion. Working across three of the country’s major mobile telecommunication networks, financial inclusion is finally in the grasp of everyday Peruvians.
What took place in Peru shows that collaboration is a hugely useful and important tool in building payments systems that reach scale and works to substantially improve the ability to bring millions into the world of digital payments.
Jeffrey Bower is a digital finance specialist with the Better than Cash Alliance.
This article originally appeared on Ericsson’s Financial Services Blog and is reposted with permission.
How did Peru’s financial institutions and stakeholders pull off the world’s biggest interoperability achievement — and what lessons can other mobile money systems learn?
Read more to discover the story behind the success:
What did Peruvian institutions do differently from Kenya or Tanzania? They decided to collaborate first in order to compete later, Devex explains.
Thirty-two financial institutions founded Pagos Digitales Peruanos (PDP), a company jointly owned by them and by the Peruvian Bankers Association, tasked with building and managing Bim. The institutions shared development costs and built the open-loop platform so that any bank could connect to the network to deliver their own products and services via Bim.
In Kenya, Safaricom essentially controls mobile money. In Peru, Bim is built on the existing infrastructure of bank branches, ATMs, and the like that are now accessible to anyone across Peru via their phone no matter where they are physically, which phone network they use, or how much money they have.
With brand-new access to formal financial services, the 70 percent of Peruvians who were formerly excluded can now access and use their money more efficiently.
They are new customers Peru’s financial institutions couldn’t reach before. Now these companies can compete for a slice of a much larger pie, with products and services to meet the needs of Peruvians on every rung of the ladder.
Why haven’t all mobile money programs earned widespread customer adoption? Closed-loop systems don’t make mobile money attractive enough to switch away from cash, Jeffrey Bower writes . Bower played a key role launching Modelo Perú through his work providing expert technical assistance to establish multi-stakeholder partnerships and build successful payment products that people actually use.
Bim’s achieved this thanks to its founders’ focusing on building the partnership even more than the technology. Cash is universally accepted, he explains, so mobile money must be, too, in order to achieve scale. That’s also how you include those excluded from formal financial services, whether because of their distance from branches or their discomfort with moving away from cash when income and expense alignment is too narrow to accommodate transfers to and from different mobile money systems.
“If you have a phone, you have Bim,” the slogan goes — and the beta testers Bower interviews in this pre-launch article confirm its ease of use.
Much like the credit card industry was hampered by proprietary systems 40 years ago, experts tell Quartz, mobile money in Africa is hitting a wall due to the closed-loop systems on which it is built. Kenya’s success with mobile money is well known, but other countries haven’t replicated Kenya’s — and now Peru’s — success.
Ironically, the agent model M-Pesa uses can actually exclude the poorest of the poor. Because agents who process M-Pesa transactions earn more when customers move more money, Vahid Monadjem, chief executive of South African enterprise payments provider Nomanini tells Quartz, the agent model “can’t get all the way down” to the level of customers who need to make very transactions.
This is where Modelo Perú is built to overcome challenges M-Pesa faces. Most mobile money systems use the agent model because it is much cheaper than building ATMs or bank branches. Bim, however, was built specifically to take advantage of existing digital and physical infrastructure. Its open-loop system means that Peru’s 30,000 existing ATMs are all part of Bim from day one, and it works with any phone carrier. The system’s slogan makes its accessibility clear: “If you have a phone, you have Bim.”
This post was curated by News Deeply.
Featured image: An Andean woman talks on her cell phone at a producers market in Lima Peru. (Photo credit should read CRIS BOURONCLE/AFP/Getty Images)