Last updated: 20 August 2015
Recent developments in the national regulation and partnerships between telecommunications companies and financial institutions are pointing to the large potential for the sector of mobile payments in Brazil.
In this article we will present an overview of the current status of mobile payments in the country.
A number of global analysts have reported on the potential of growth in the sector of mobile payments in Brazil, and to some extent these forecasts have been related to the introduction of regulatory measures by Banco Central, the Brazilian Central Bank, that took place during 2013. The Brazilian financial and payment systems are considered relatively modern and forward-thinking when compared to other territories, and the introduction of such measures was considered by many players as a solid base to the development and spread of mobile payments in the country.
The most relevant regulatory measure introduced that year, Lei 12.865 establishes a number of important directives to these players. For example, the law presents a framework that allows for players other than banks to provide financial services, as soon as they are authorized by Banco Central. The payment institutions, as they are referred to, have the right to provide services such as management of a virtual wallet or account, enable withdrawal or deposits to these accounts and enable transfers between accounts.
As it stands, the law provides all the necessary legal basis for telecommunications service providers to start offering mobile payment services with full compliance to the Brazilian payment systems and national regulation. Additionally, it enforces a number of principles that should become crucial to the development of mobile payments in Brazil, such as the interoperability between payment services. Considering the great number of mobile payment initiatives that have been created over the last few years, the inability to interchange between each service would have been a major hindrance to the growth of mobile payments in Brazil.
The law also grants Banco Central the right to regulate payment arrangements, authorize and supervise payment institutions. Currently, the interoperability between payment services is not mandated to providers, but is expected to be implemented as the national market develops and additionally, more incisive regulation is introduced. A number of players, market analysts and government institutions foresee that these solid measures, combined with the great potential of the Brazilian market, will see the adoption of mobile payments take off in the near future.
Potential of Mobile Payments in Brazil
Mobile payment initiatives first saw exponential success in African territories, where large portions of each country’s population had no access to bank accounts and in most cases were users of a single dominant mobile operator. Brazil currently presents a somewhat similar scenario, in which mobile payment services present an unmatched potential for growth due to the large portion of the population with no access to bank accounts and the incredibly high adoption of mobile phones across all social classes and regions of the country.
Statistics from Ipea, the Brazilian Institute for Applied Economic Research indicate that there are 55 million adults in Brazil with no bank accounts. On the other hand, data from Anatel, the Brazilian Telecommunications Agency, from June 2015 state that there are over 282.4 million mobile phone activations in Brazil, with penetration of over 115% in all regions of the country.
One aspect of the adoption of mobile telephones in Brazil that differs from African countries is the level of competition in the market, where each of the four largest operators hold between 15% and 30% of the market share. Due to this level of fragmentation, the need for interoperability between the services of each operator becomes much more prevalent, enabling users to make financial operations between the numerous competitors without limitations.
Another factor that is capable of fostering the expansion of mobile payments in Brazil is the spread of Point of Sales machines able to capture payments from mobile devices through contactless technology. Most of the POS machines used actively by millions of Brazilian retailers are connected to an infrastructure able to capture payments through Near Field Communications technology, which adds security and convenience to mobile payment users.
Recent Developments and Partnerships
Mobile payment initiatives are no recent trend in Brazil, considering carrier Oi started offering the Oi Paggo solution to subscribers in 2006. After recent agreements and partnerships between the major mobile operators in Brazil and banks, all of the four main Brazilian carriers currently provide a mobile payment solution. The revenue adopted by the carriers is mostly similar, charging users per transaction and in some cases also charging a monthly fee.
As a partnership between carrier Vivo and card network Mastercard, Zuum was launched in 2013 as a mobile payment solution where users could establish accounts by registering only their name and CPF, make deposits from numerous registered POS machines in the country and transfers between accounts with a limit of BRL 5,000 per month.
Zuum’s systems make use of USSD technology for data interchange and can also be operated through a proprietary app. Users with accounts at affiliated banks, which include Itaú, Santander, Banco do Brasil and HSBC, are allowed to make deposits directly to their mobile accounts at Zuum’s online environment. The service also allows for the issuance of a debit card and currently has 410 thousand users in Brazil.
Meu Dinheiro Claro
The Meu Dinheiro Claro mobile payment solution was established in 2014 as a joint venture between carrier Claro and bank Bradesco, allowing users to set up accounts, make deposits at Bradesco agencies and ATMs and make transfers and payments at a vast number of retailers. Meu Dinheiro Claro’s systems also make use of USSD technology.
Carrier Oi and Banco do Brasil established a partnership in 2013 to launch the Oi Carteira mobile wallet solution, which allows for users to set up accounts, make transfers and payments at a large number of retailers and also issues a debit card.
Deposits to the mobile account can be made at Banco do Brasil agencies and authorized correspondents or online, in case the user already has an account at the bank. The systems make use of SMS technology for data interchange and the service is charged a monthly fee of BRL 8,00.
In March 2015, carrier TIM, bank Caixa Econômica and network Mastercard launched the Multibank mobile payment solution in three Brazilian cities: Natal, Uberlândia and Curitiba. The service allows the carrier's subscribers to set up accounts, make deposits at Caixa Econômica agencies and correspondents, make transfers and issues a debit card. Multibank’s systems make use of USSD technology for data interchange.