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IFC Mobile Money Scoping Country Report: Mexico
JULY 29, 2011
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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)
Main banks Bancomer, Banamex, Santander, Banorte, HSBC
Mobile Network Operators Telcel (71% market share), Movistar (21%), Iusacell (4%), Nextel (4%)
Ease of doing business 35th 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.
Mexico Summary
Mobile Money readiness (1-5)
Regulation 4
Financial Sector 3
Telecom Sector 1
Distribution Channel 4
Market Demand 3
• Macro-economic Overview
• Regulations
• Financial Sector
• Telecom Sector
• Distribution Channel
• Mobile Financial Services Landscape
3
• Population: 112,322,757 (57ppl/sqm)
• Age distribution:
• 0-14 years: 28.2%
• 15-64 years: 65.2%
• 65 years and over: 6.6%
• Urban/rural split: 80/20 (1.5%
urbanization rate 2005-2010)
• 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%
Key Country Statistics
Sources: IOM world, Wikipedia, CIA WORLD FACTBOOK, GSMA
• 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
Macro-Economic Overview
Insights
4
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)
Several factors limit banking growth
Sources: IOM world, Wikipedia, CIA WORLD FACTBOOK, GSMA
Mobile & Banking Penetrations
Whereas mobile penetration has increased steadily
Despite a relatively well organized
banking sector, banking
penetration remains low compared
to mobile penetration.
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Mobile penetration rate evolution in Mexico
Customer base Penetration rate
5
• Macro-economic Overview
• Regulations
• Financial Sector
• Telecom Sector
• Distribution Channel
• Mobile Financial Services Landscape
6
Role: Ensure stability of the Mexican
financial system, foster its development and
efficiency for the benefit of Mexican citizens
Comisión
Nacional
Bancaria y de
Valores (CNBV)
Role: legal authority to supervise, promote,
regulate and coordinate an efficient
development and the social coverage of the
telecommunication sector
Cofetel – Comisión Federal de Telecomunicaciones (Telecom Regulator)
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
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
Unidad de Información
Financiera (UIF)
Role: Issuing regulations and criteria to
interpret AML regulations
Banking, Securities
and savings Unit (UBVA)
Regulatory Bodies
Implications Roles & Responsibilities
7
There is no regulation on e-money.
The “Niche bank” system encourages non-
banks to offer financial services. E-Money
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
Retail Agents
Regulatory Framework & Requirements
Implications Current Regulations
Deposit Taking
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
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
Customer
Protection
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
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$100,000 per month should be subject to
stricter monitoring.
In 2008, UIF received 36,934 STRs and
6,513,147 CTRs
Record keeping: 10 years
KYC/AML
Requirements
Regulatory Framework & Requirements
Implications Current Regulations
Account opening:
Customer identification /verification
is less restrictive given the low
value account regulation.
Unbanked and under banked are
directly targeted
Financial services:
Daily and monthly transaction
limits already defined by the law
and the thresholds depend on the
type of account
However, the law has no clear
definition yet on repeated
transactions and number of
accounts owned by a single user.
9
Source: CGAP
There are four types of transactions
according to AML/CFT risks and security
controls: Micro payment (<24 US$/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
KYC/AML
Requirements
(con’t)
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
Regulatory Framework & Requirements
Implications Current Regulations
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 Payment Services
Banking
10
Source: CGAP
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
Additional Regulatory Considerations
Implications Current Regulations
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 Interoperability
Data Privacy
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
Taxation High level of taxation will have a significant
impact on the final price of the service to
consumer
11
Source: CGAP
• Macro-economic Overview
• Regulations
• Financial Sector
• Telecom Sector
• Distribution Channel
• Mobile Financial Services Landscape
12
Source: Prodesarrollo.
Financial Infrastructure
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)
Banks
Public 41
Private 6
Branches
ATMs 35 932
POS terminals 457 677
Debit cards 12 000 000
Credit cards 26 000 000
Microfinance Institutions
> 100,000 customers 5
20,000 to 100,000 customers 9
< 20,000 customers 71
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
• 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
Bank Snapshot
• 1,696 Branches
• 5,855 ATMs
• 12,622,921 checking accounts
• 33,347 savings accounts
• 9,001,407 payroll accounts
• 708,862 deposit accounts
• 1,075 Branches
• 4,439 ATMs
• 7,407,071 checking accounts
• 52,949 savings accounts
• 6,415,370 payroll accounts
• 384,287 deposit accounts
• 1,134 Branches
• 5,004 ATMs
• 580,132 checking accounts
• 5,731,214 savings accounts
• 4,200,249 payroll accounts
• 512,706 deposit accounts
• 1,144 Branches
• 6,331 ATMs
• 5,218,538 checking accounts
• 174,003 savings accounts
• 1,967,554 payroll accounts
• 382,028 deposit accounts
• 255 Branches
• 745 ATMs
• 312,525 checking accounts
• 16,655 savings accounts
• 111,639 payroll accounts
• 1,582 deposit accounts
• 647 Branches
• 1,492 ATMs
• 1,819,822 checking accounts
• 13,097 savings accounts
• 627,945 payroll accounts
• 118,937 deposit accounts
BBVA Bancomer
Banamex
Santander
Banorte
HSBC
Inbursa
Scotiabank
14
• 1,625,151
Customers
• Loan portfolio: $US
705,453,215 • Average loan: $US 434.1
MFI Snapshot
• 1,343,900
Customers
• Loan portfolio: $US
445,603,315 • Average loan: $US 331.6
• 34,582 Customers • Loan portfolio: $US
65,319,439 • Average loan: $US 1,888.8
• 104,155
Customers
• Loan portfolio: $US
61,340,548 • Average loan: $US 588.9
• 72,240 Customers • Average loan: $US 816.1
• 198,550
Customers • Average loan: $US 233.5
• 109,502
Customers • Average loan: $US 284.7
Compartamos
Financiera
Independencia
Eurekasoli
Apoyo Económico
Familiar
Fincomún
Came
Finca México
• Loan portfolio: $US
58,957,706
• Loan portfolio: $US
46,371,979
• Loan portfolio: $US
31,180,005
15
Large Financial Flows Opportunity analysis summary
Bill payments ●
35m clients
for CFE
•Bills (electricity, water) can be paid at partner banks’ branches and also in stores (Soriana, Wal-
Mart)
•Companies exploring mobile bill payment services with partner banks (e.g. CFE bills with
several banks)
P2P
(domestic) ● N/A
•Strong domestic migration from rural areas to the main metropolitan areas
G2P ● N/A
•There are several government programs in place in Mexico (e.g. Oportunidades, a government
social assistance program providing cash payments to 5m families)
•Bansefi & Diconsa partnership to create a network to provide access to government benefits
B2B, B2C or
B2Employees ● N/A
•Some banks have expressed interest in exploring salary payment opportunities through mobile
Credit &
micro-finance ● N/A
•Compartamos is by far the dominant player in the MFI landscape while many other MFIs have
yet to be more mature in their operations
•Potential for microfinance remains high
Remittances
(international) ●
US$ 21.7bn
•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
Source: Amarante analysis ● Significant
opportunity ● Potential
opportunity ● Weak
opportunity
16
Additional opportunities: Public transport, Payroll (informal market)
• Macro-economic Overview
• Regulations
• Financial Sector
• Telecom Sector
• Distribution Channel
• Mobile Financial Services Landscape
17
• 100% América Móvil • 61.24 M subs (July 2010)
• 70.8% Market share
• Partnership with Banamex to
provide SMS-based mobile
banking services
Mobile Network Operators
Name
• 100% Telefonica • 18.26 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
Name
18
Mobile Outlook - a Dynamic Market
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)
0
10
20
30
40
50
60
70
80
2010 2014
Millions
subsc
ribers
Mobile subscribers forecast
Telcel Movistar Iusacell Nextel
Source: ie Market Research
19
Relatively low ARPU: around $12 (at
the exception of Nextel that does not
target prepaid customers)
Note: Iusacell has not reported any
figure on its ARPU.
Mobile data applications usage’s growth
should sustain ARPU’s growth and
compensate potential lower revenue per
user on voice
Consequence
Potential revenue growth from
volume recruiting new customers
(around 80% penetration rate as of
today)
And from additional services
providing new revenue stream
Key learning and conclusions
Mobile Outlook - ARPU Trend
ARPU/Operator ($US equivalent)
Need for value creation and new revenue streams beyond
traditional voice to sustain ARPU levels
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2008 2013
ARPU/Operator ($US equivalent)
Telcel Movistar Iusacell Nextel
Sources: ie Market Research
20
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
Key learning and conclusions
Mobile Outlook - a Prepaid Market
Prepaid vs. Postpaid customers (as a %)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 Q3-2010
PREPAID POSTPAID
Source: Cofetel
21
• Macro-economic Overview
• Regulations
• Financial Sector
• Telecom Sector
• Distribution Channel
• Mobile Financial Services Landscape
22
Retail network structure
Specialized /
Convenience
Stores
Corner Stores
Department
Stores
Hyper
Super
Markets
3,398 stores
14,177 stores
1,473 stores
Source: ANTAD, August 2010
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
Mexico has a large number of department stores, including the
Mexican chains: El Palacio de Hierro, Liverpool, Suburbia,
Sanborns, Coppel and Elektra
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.
There is no exact figure on the number of corner stores in
Mexico.
Distribution Landscape
23
• Macro-economic Overview
• Regulations
• Financial Sector
• Telecom Sector
• Distribution Channel
• Mobile Financial Services Landscape
24
Const
rain
ts t
o p
rovid
e t
he s
erv
ice
Regulatory barrier to obtain a MM license -
+
+
Operator-led model
• Service entirely distributed and managed by the operator under its own license and own brand
Joint Venture model
• Service co-branded and co-distributed with the operator and/or the bank
Bank-led model
• Mobile channel is only seen as an access channel (bearer) to banking services
Operator-driven model
• Service distributed and managed by the operator under a partnering bank’s license
Highlights
Third-party led
Model
Current MFS Initiatives in Brazil
•Several banks offer
traditional internet m-
banking services
•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
•Bill payment
initiatives from
several banks
25
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