Coffee, Football, Hazel Nuts - can Mobile Payments do it for Brazil?

Brazil is famous for their Coffee, Football, & Hazel nuts. As 2014 football world cup approaches nearby, People in Brazil are very anxious to see how their team performs in the upcoming tournament. As a payment analyst I’m more interested to look at how Brazil as a nation will make an impact in the field of payments. Brazil has got the right ingredients to make a great recipe in payments, but it will require assistance from policy makers, innovative startups and finally acceptance/adoption by customers.

In 2012 Brazilian Telcos found mobile financial services as the most promising revenue stream for the future, which prompted them to create new business units inside their organizations. The major telecom operators in Brazil are VIVO, Oi and Tim and they have undergone partnership with various Canadian banks to provide mobile payment services. Currently Brazil has 6.2 million registered mobile payment users, and most people are using SMS based service for making payments.

On August 2013 we saw Central Government of Brazil passed the much awaited Bill medida provisoria (MP) for mobile payments. The bill paved the way for a number of commercial partnerships to come to the market. Some of the partnerships are Vivo forming a joint venture with MasterCard, Oi Brazil partnership with Banco de Brazil to launch Oil Cartera.

Following are the reasons on Why we think Brazil can make it big in payments:-

  • Brazil has mobile penetration of over 140%; Smart phone penetration is 23% which is expected to reach 40% by 2017.
  • Increase in average revenue per user (Telco ARPU) by 60% is an encouraging sign for the country. This is driven by 30 million smartphone users as well as others
  • Mobile and Digital payments will act as an alernative to the high prices banks charge in banking and credit transactions. Something that an average Joe is asking for...
  • Healthy competition among Telco’s like Tim, Claro, and Oi in the field of mobile payments is an encouraging sign for the future prospects in payments at Brazil.

Challenges that Brazil might face for growth of mobile payments:

  • Development of supporting infrastructure (such as ACH, security, fraud) is needed to ensure faster and safer payments
  • Lack of EMV or wireless EMV (NFC) enabled POS to safely and successfully complete the transactions
  • Consumer confidence in secure mobile payment transactions is low
  • In Brazil, 39.5% of people aged 18 or above don’t have bank accounts, which remains to be an area of concern for Brazil but could well become an opportunity (for prepaid cards, etc.). What is happening in India is amazing with 400+ million people having Biometric authentication (program called Aadhar) and which is now enabling a payment system

It is believed that technology firms and startups will help innovation in mobile payments in Brazil. Payment companies like Paytronics, Zoop, Akapay and Gopay have a very good opportunity to make their mark in the emerging mobile payments market like Brazil. According to Frisz, Paytronics president, the consumer will not be paying attention to the enabling technology when choosing a mobile payment solution, rather the main decision criteria will be the consumer’s interaction with the mobile wallet installed on their phone, integrated loyalty programs, and security guarantees relating to the personal data stored on the mobile device