IFC Mobile Money Scoping Country Report: Mexico JULY 29, 2011

Transcription

1 IFC Mobile Money Scoping Country Report: Mexico JULY 29, 2011

2 Mexico Summary Overall Mobile Money Readiness 3 (Good) Current Mobile Money Solution N/A Population 112 million (Very High) Mobile Penetration 79% (High) Banked Population 30% (Low) Remittance % of GDP 1.45% (Moderate) Percent under poverty line 18% (Relatively Low) Economically Active population 42% (Moderate) Adult Literacy 86% (High) Mobile Money readiness (1-5) Regulation 4 Financial Sector 3 Telecom Sector 1 Distribution Channel 4 Market Demand 3 Main banks Bancomer, Banamex, Santander, Banorte, HSBC Mobile Network Operators Telcel (71% market share), Movistar (21%), Iusacell (4%), Nextel (4%) Ease of doing business 35 th out of 183 Comments Mexico is one of the largest economy and one of the most populated countries in Latin America. Mexico s banking sector is mainly dominated by foreign banks with the exception of Banorte and to a lesser extent Inbursa. The mobile sector is almost a monopoly of Telcel, however its main competitors are gaining market share (Movistar). There were few examples of mobile banking solutions and no mobile money solutions until recently, but the market is starting to show signs of activity, leveraging a favourable regulatory environment for simplified bank accounts and use of non banking agents. 2

3 Macro-economic Overview Regulations Financial Sector Telecom Sector Distribution Channel Mobile Financial Services Landscape 3

4 Macro-Economic Overview Key Country Statistics Population: 112,322,757 (57ppl/sqm) Age distribution: 0-14 years: 28.2% years: 65.2% 65 years and over: 6.6% Urban/rural split: 80/20 (1.5% urbanization rate ) GDP (PPP): $1560Bn in 2010 GDP per capita (PPP): $14,932 Literacy rate: 92.43% Banking penetration: 30% Mobile phone penetration: 79% Remittance (% of GDP): 1.45% Insights Actual potential market size of 60-70m people is favorable for both a volume approach and a value approach and a rapid adoption of mass-market services (P2P ) Median age and high literacy rate are enabling factors: more elaborate mobile money technology is relevant in Mexico Price sensitivity is likely to be high due to the population distribution (youth proportion, under poverty line rate ) and will be a key element of a successful value proposition G2P payments and domestic transfers could be sizeable enough to represent an interesting opportunity Value wise, international remittance (IMT) is significant, IMT to be considered at a later stage once basic MM services have gained ground Sources: IOM world, Wikipedia, CIA WORLD FACTBOOK, GSMA 4

5 Thousand people Mobile & Banking Penetrations Several factors limit banking growth Whereas mobile penetration has increased steadily 1. Banking infrastructure availability, though relatively good overall, is low for certain segments of the population: Infrastructure network is far more developed in urban areas than in rural areas Overall, 10.6 bank branches / 100,000 Mexican residents 32 ATMs / 100,000 Mexican residents 415 PoS terminals / 100,000 Mexican residents 2. Some banks, like Banco Azteca, focus on low income population 3. A rather elitist approach of some other banks (corporate like IXE Banco, high-end, middle-class) Despite a relatively well organized banking sector, banking penetration remains low compared to mobile penetration Mobile penetration rate evolution in Mexico Q % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Sources: IOM world, Wikipedia, CIA WORLD FACTBOOK, GSMA Customer base Penetration rate 5

7 Regulatory Bodies Roles & Responsibilities Implications Comisión Nacional Bancaria y de Valores (CNBV) Cofetel Comisión Federal de Telecomunicaciones (Telecom Regulator) Unidad de Información Financiera (UIF) Banking, Securities and savings Unit (UBVA) Role: Ensure stability of the Mexican financial system, foster its development and efficiency for the benefit of Mexican citizens Role: legal authority to supervise, promote, regulate and coordinate an efficient development and the social coverage of the telecommunication sector Role: Responsible for receiving, analyzing, and disseminating STRs (Suspicious Transactions Reports) and CTRs (Cash Transactions Reports), as well as reports on the cross-border movements of currency Role: Issuing regulations and criteria to interpret AML regulations Buoyant regulatory environment: Recent introduction of a new regulation on branchless banking that paves the way to broader financial inclusion through mobile phones Wal-Mart Bank was the first to inaugurate the agency model, after a long authorization process by the CNBV Banks may provide a number of services through a network of banking agents Regulator is open to Mobile Banking; several mobile banking services have already been launched Recent regulation (Feb 2010) allows MNOs to set up agent networks and manage mobile accounts on behalf of banks, based on outsourcing agreements 7

8 Regulatory Framework & Requirements Current Regulations Implications E-Money Deposit Taking Retail Agents Customer Protection Source: CGAP There is no regulation on e-money. The Niche bank system encourages nonbanks to offer financial services. Commercial Code defines a deposit as repayable funds Nonbanks excluded from the deposit-taking business Only authorized banks can have banking correspondents Banks can open mobile accounts via agents (including MNOs), and must produce a file with the clients name, birth date and address Monthly deposits are limited to MXN 8,720 Financial consumer protection law and the transparency law (Condusef specialized financial consumer protection agency) Basic consumer protection principles, conflict resolution procedures, and penalties for noncompliance Require banks to provide all-inclusive price information by displaying fees and charges in branches Only registered banks or non-banks will be able to offer mobile financial services. MNOs role is limited by the law. Non-banks are still authorized to issue prepaid cards used for purchases of goods that belong to the same business as the issuer Increasing number of banking correspondents (around 16,000 as of today) should foster financial inclusion and give the unbanked population access to basic type of accounts Mexicans usually own an ID or other type of identification form Existing consumer protection agency should make it easier to deal with the specificities of consumer protection applied to mobile financial services 8

9 Regulatory Framework & Requirements Current Regulations Implications KYC/AML Requirements Source: CGAP Based on several laws: Ley General de Organizaciones y Actividades Auxiliares del Crédito, Ley de Instituciones de Crédito, Ley de Mercados de Valores, Ley de Ahorro y Crédito Popular, Ley de los Sistemas de Ahorro para el Retiro, Ley General de Instituciones y Sociedades Mutualistas de Seguros, Ley Federal de Instituciones de Fianzas. The Penal Code defines the crimes related to AML/FT in its articles 139, 148 Bis and 400 Bis. Customer identification: Banks are required to know the identity of all their clients and depositors Customer verification: ID, tax card, and proof of address (if address is different from the address noted in the identification document) Transaction verification & thresholds: All transactions in cash exceeding $10,000 are treated as suspicious under the law. CNBV licensed entities are required to report all suspicious transactions to the UIF. In the case of money transferors, this limit is at $3,000 High-risk clients and users or those whose transactions exceed the equivalent of US$100,000 per month should be subject to stricter monitoring. In 2008, UIF received 36,934 STRs and 6,513,147 CTRs Record keeping: 10 years Account opening: Customer identification /verification is less restrictive given the low value account regulation. Unbanked and under banked are directly targeted Financial services: Daily and monthly transaction limits already defined by the law and the thresholds depend on the type of account However, the law has no clear definition yet on repeated transactions and number of accounts owned by a single user. 9

10 Regulatory Framework & Requirements KYC/AML Requirements (con t) Banking Payment Services Source: CGAP Current Regulations There are four types of transactions according to AML/CFT risks and security controls: Micro payment (<24 US$/day), Low amount (<86 US$/day), Medium amount (<520 US$/day), High amount(>520 US$/day) The regulation also introduces the concept of low value account targeting people underserved by financial services Four types of banks with different levels of initial capital requirements and types of operation One is categorized under the label traditional banks and three under the label niche banks Traditional banks require higher min capital requirements and benefit from broader scope The Payment System Law (PSL) designates Banxico (Banco de Mexico) as the regulator and supervisor of the payment system A payment system will only be subject to the PSL if at least three licensed financial institutions participate and if it processes the equivalent of US$37 billion or more per year Implications Niche bank regulation allows non-banks to convert more easily into banks and offer limited financial services to clients MNOs and MFIs could envisage applying for it but additional entry barriers to be expected (organization and reporting constraints) This regulation creates a more attractive entry door for nonbanks to provide some financial services without need to apply for a full fledged bank license. A bank or prudentially regulated institution will need to be involved 10

11 Additional Regulatory Considerations Taxation Data Privacy Interoperability Source: CGAP Current Regulations Tax on cash deposits (law of 2007) IDE (Impuesto a los Depositos de Efectivo) is a 2% witholding tax on all cash deposits Each agent s operating account subject to the IDE The legislation provides for recognition of electronic signatures when the authenticity and integrity of the original electronic document is preserved according to specified parameters Integrity of the original electronic document is preserved according to specified parameters Electronic documents can be used as proof in court and in complaints filed in consumer protection agencies. CNBV has issued extensive regulation on security requirements for electronic transactions No specific data privacy law yet (draft law in Congress) Some ATMs and Pos terminals are interoperable allowing withdrawal and payments with cards from any bank Deposits can be made only at ATMs and branches of the bank where the account is held Implications High level of taxation will have a significant impact on the final price of the service to consumer Given its complexity and strictness, regulation on security requirements for electronic transactions may eventually create obstacles for emerging branchless banking models, as described by some industry actors Penalization of digital crimes is reportedly slow and difficult High cost of withdrawing money in a different bank 11

13 Financial Infrastructure Banks Public 41 Private 6 Branches ATMs POS terminals Debit cards Credit cards Microfinance Institutions > 100,000 customers 5 20,000 to 100,000 customers 9 < 20,000 customers 71 Facts: Strong banking system, increasingly dominated by foreign institutions: Citi-Banamex, BBVA-Bancomer, Santander and HSBC among the leading banks (with the exception of Banorte) In recent years, the government and the CNBV have passed several banking reforms aimed at fostering financial inclusion and strengthening the nation s financial network and system Significant low income masses once out of the financial system are today more addressed by the agency banking model The microfinance market is one of the most dynamic in Latin America with 85 registered MFIs, 1522 branches and 4.3m clients (85% are women) Source: Prodesarrollo. Clearing and Settling Clearing house settlement system (SICAM) Ownership: Banco de México Description: provide clearing and settlement of interbank documents, including checks, electronic funds transfers, direct debit operations, and interbank cash operations. Participating banks: banks offering checking accounts, direct debits, and electronic funds transfer. Credit Bureaus Buró de Crédito Ownership: private organization collectively owned by Mexico's banks Participants: Mexico s financial institutions Users also include Sofoles, real estate co, automobile finance companies, credit card companies TransUnion de México (collects and distributes credit information on individual consumers for Buro de Crédito) Ownership: JV between TransUnion, Fair Isaac Corp and Mexican commercial banks Dun and Bradstreet (focuses on the activities of firms and individuals with entrepreneur activity for Buro de Crédito) Ownership: Dun and Bradstreet, TransUnion and Mexican commercial banks 13

14 Bank Snapshot BBVA Bancomer 1,797 Branches 6,760 ATMs 1,395,319 checking accounts 7,882,143 savings accounts 6,576,455 payroll accounts 297,774 deposit accounts Banamex 1,696 Branches 5,855 ATMs 12,622,921 checking accounts 33,347 savings accounts 9,001,407 payroll accounts 708,862 deposit accounts Santander 1,075 Branches 4,439 ATMs 7,407,071 checking accounts 52,949 savings accounts 6,415,370 payroll accounts 384,287 deposit accounts Banorte 1,134 Branches 5,004 ATMs 580,132 checking accounts 5,731,214 savings accounts 4,200,249 payroll accounts 512,706 deposit accounts HSBC 1,144 Branches 6,331 ATMs 5,218,538 checking accounts 174,003 savings accounts 1,967,554 payroll accounts 382,028 deposit accounts Inbursa 255 Branches 745 ATMs 312,525 checking accounts 16,655 savings accounts 111,639 payroll accounts 1,582 deposit accounts Scotiabank 647 Branches 1,492 ATMs 1,819,822 checking accounts 13,097 savings accounts 627,945 payroll accounts 118,937 deposit accounts 14

15 MFI Snapshot Compartamos 1,625,151 Customers Loan portfolio: $US 705,453,215 Average loan: $US Financiera Independencia 1,343,900 Customers Loan portfolio: $US 445,603,315 Average loan: $US Eurekasoli 34,582 Customers Loan portfolio: $US 65,319,439 Average loan: $US 1,888.8 Apoyo Económico Familiar 104,155 Customers Loan portfolio: $US 61,340,548 Average loan: $US Fincomún Loan portfolio: $US 72,240 Customers Average loan: $US ,957,706 Came 198,550 Customers Loan portfolio: $US 46,371,979 Average loan: $US Finca México 109,502 Customers Loan portfolio: $US 31,180,005 Average loan: $US

16 Large Financial Flows Bill payments P2P (domestic) G2P B2B, B2C or B2Employees Credit & micro-finance Remittances (international) 35m clients for CFE N/A N/A N/A N/A US$ 21.7bn Opportunity analysis summary Bills (electricity, water) can be paid at partner banks branches and also in stores (Soriana, Wal- Mart) Companies exploring mobile bill payment services with partner banks (e.g. CFE bills with several banks) Strong domestic migration from rural areas to the main metropolitan areas There are several government programs in place in Mexico (e.g. Oportunidades, a government social assistance program providing cash payments to 5m families) Bansefi & Diconsa partnership to create a network to provide access to government benefits Some banks have expressed interest in exploring salary payment opportunities through mobile Compartamos is by far the dominant player in the MFI landscape while many other MFIs have yet to be more mature in their operations Potential for microfinance remains high US-Mexico corridor is one of the largest worldwide corridors for international remittances Market is competitive, highly fragmented and already well addressed leading to relatively low prices Banks benefit from their large distribution network to serve most of the incoming remittances Additional opportunities: Public transport, Payroll (informal market) Source: Amarante analysis Significant opportunity Potential opportunity Weak opportunity 16

18 Mobile Network Operators Name 100% América Móvil M subs (July 2010) 70.8% Market share Partnership with Banamex to provide SMS-based mobile banking services Name 100% Telefonica M subs (July 2010) 21.1% Market share JV partnership with MasterCard in Latin America to provide mobile banking solution Name 76% Grupo Salinas 23% Publicly Traded 3.79 M subs (July 2010) 4.4% Market share No known projects under way Name 100% NII Holding 3.19 M subs (July 2010) 3.7% Market share No known projects under way 18

19 Millions subscribers Mobile Outlook - a Dynamic Market Source: ie Market Research Mobile subscribers forecast Telcel Movistar Iusacell Nextel Key Learning: Dynamic market, subscribers base will reach 107.3M people by the end of 2014 according to forecasts Telcel dominates the mobile landscape in Mexico and any of its decisions in the MFS space shall significantly influence the overall industry Telcel has a very dominant position in the market but competition is on the rise (monthly churn rate for Telcel is 3.6%). According to forecast, its market share is likely to decrease and reach 67.4% by 2014 While Movistar s market share, and to a lesser extent Nextel and Iusacell s will increase (Movistar s market share is predicted to reach close to 25% in 2014) 19

20 Mobile Outlook - ARPU Trend ARPU/Operator ($US equivalent) Key learning and conclusions ARPU/Operator ($US equivalent) Telcel Movistar Iusacell Nextel Relatively low ARPU: around $12 (at the exception of Nextel that does not target prepaid customers) Note: Iusacell has not reported any figure on its ARPU. Mobile data applications usage s growth should sustain ARPU s growth and compensate potential lower revenue per user on voice Consequence Potential revenue growth from volume recruiting new customers (around 80% penetration rate as of today) And from additional services providing new revenue stream Sources: ie Market Research Need for value creation and new revenue streams beyond traditional voice to sustain ARPU levels 20

21 Mobile Outlook - a Prepaid Market Prepaid vs. Postpaid customers (as a %) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q PREPAID POSTPAID Source: Cofetel Key learning and conclusions Key figures: As of Q3-2010, Prepaid customers account for 87% of total customer base However since 2008 postpaid share is on the rise with MNOs developing medium/high-end segments targeted offers Nextel is clearly targeting postpaid customers Consequence: MNOs are trying to be innovative offering new VAS We can expect MNOs to rapidly introduce additional MFS in Mexico 21

23 Distribution Landscape Retail network structure Hyper Super Markets 3,398 stores Offer a large variety of items (grocery products, clothing, home products, electronics ). Typically located around urban areas with over 100,000 inhabitants. Industry leaders are: Wal-Mart, Mega Com Mexicana, Soriana, Superama, HEB, Chedraui Department Stores 1,473 stores Mexico has a large number of department stores, including the Mexican chains: El Palacio de Hierro, Liverpool, Suburbia, Sanborns, Coppel and Elektra Specialized / Convenience Stores 14,177 stores Oxxo and 7 eleven are the two largest chains with Oxxo having more than 7,300 stores in Mexico and 7 Eleven more than 1,000. They both offer financial services partnering with banks as well as airtime mobile recharge. Corner Stores There is no exact figure on the number of corner stores in Mexico. Source: ANTAD, August

25 Constraints to provide the service Current MFS Initiatives in Brazil + Joint Venture model Service co-branded and codistributed with the operator and/or the bank Bank-led model Mobile channel is only seen as an access channel (bearer) to banking services Highlights Several banks offer traditional internet m- banking services Third-party led Model As of today, no known MFS services have been launched in Mexico Several initiatives taking place at present in the market: Since 2011, Mastercard/Movis tar JV partnership Operator-led model Service entirely distributed and managed by the operator under its own license and own brand Operator-driven model Service distributed and managed by the operator under a partnering bank s license Bill payment initiatives from several banks - Regulatory barrier to obtain a MM license + 25