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Latin America is considered a unique market when it comes to mobile driven services, especially as its massively unbanked population becomes increasingly liberated by the availability of mobile payment solutions. Omlis, pioneers of high integrity mobile payment security, takes a closer look at one region, Chile, to understand how mobile devices are impacting commerce through the use of new mobile payment technologies.
Internet penetration in Chile is among the highest in Latin America and online retail is growing rapidly, with demand staying ahead of local supply. Mobile has grown into the primary internet connection for many Chileans. Fixed internet connections remain quite low when compared to other parts of the world, but mobile internet and mobile broadband have flourished in recent years. Download speeds in Chile are generally slower than the average, with networks such as Nextel, Movistar, Entel and Claro offering download speeds of between 0.5Mb/s and 0.9Mb/s. This is well below the global average of 1.8Mb/s, which means that in order to make effective use of Chile’s current network capabilities, any mobile banking or payments app needs to involve small data packets. However, GSMA predicted that by 2020, almost 80% of mobile phones will be running on higher speed 3G and even, increasingly, 4G networks.
In Chile, smartphone use has rapidly become more mainstream and is still growing in popularity, with over 39% of the population currently using smartphones and 91% owning a feature phone, according to Pew Research. There are initiatives for offering more affordable smartphones in Chile; for example, Telefónica introduced the Alcatel One Touch Fire in February 2014, priced at 29,990 pesos (around US$52) according to the GSMA. In terms of operating systems, Android dominates the market with a 63% share as opposed to only about a quarter using iPhones or iOS.
Penetration of smartphones is predicted to surpass the number of feature phones in Chile, signaling a shift towards higher internet and data usage. In 2014, Telefonica experienced growth rates in mobile data use of 83% in Chile as Claro recorded a 38% increase in Chilean data revenues. This has increased the opportunity for online-based mobile payments, which in turn has led to higher rates of mobile commerce.
Mobile payments have taken off with surprising ease in Chile. By 2013, 31% of the Chilean population were actively engaged in mobile commerce initiatives. Consumers in Chile are highly inclined toward m-commerce, with 20% actively engaged in mobile banking initiatives compared to just 12% in neighboring Argentina. Consumers in Chile have also demonstrated a particular preference for mobile banking and a relatively strong banking culture compared to other countries in Latin America.
The accelerated adoption of mobile payments in Chile is also matched by the variety of ways it is used across the country. Simple SMS-based P2P (peer to peer) transfers are very popular and are used by a large percentage of the population, especially for members of the Chilean population who have no access to a bank account or other financial services. This accounts for nearly half of adults in Chile. There are also more sophisticated NFC and Bluetooth based schemes like Tarjeta Bip!, Chile’s primary transport ticketing system which has similarities to London’s Oyster card scheme. BBVA Wallet was also recently introduced to Chile and has made some progress. The success of mobile payments in Chile could be seen as a catalyst for the expansion of the mobile payments market into niche verticals within the mobile commerce industry including increasingly targeted mobile marketing, coupons and loyalty initiatives.
The adoption of mobile payments is also plagued by key challenges. Payment security through the mobile channel is still a massive issue in Chile, with increasing distrust from smartphone users. The publicized hack of ‘Tarjeta BIP!’ in 2014 transported the topic of security in mobile payments to the forefront of the national media. This being said, new payment formats are becoming more widespread. 2014 saw a 3% increase in card payments and an increase of 14% in electronic transactions; however, cash still remains the primary form of payment for over half of the population.
With a predicted CAGR growth rate of 8.8% between 2014 and 2019 supported by their government and World Bank amongst others, the Chilean IT market is positioned to have what could be the most robust 4G networks in Latin America, as well as increased penetration of affordable smartphones. The Latin American region encompasses 10% of the world’s mobile users, which cannot be ignored especially when compared to North America who represent just 6%. Such encouraging data credibly positions Latin America and specifically, Chile, as lucrative mobile payments markets.
Omlis is working to deliver secure mobile payments to Chile through their partnership with ISN, a payment technology consultancy firm based in Santiago. Omlis secures the mobile channel for payments on any model of mobile device, including both feature phones and smart phones, delivering an interoperable, highly efficient and completely secure mobile payment solution to banking and commerce. The mobile payments market in Chile presents an opportunity to deliver completely secure mobile payment transactions.