Peru has launched the first national mobile payments system that operates across all mobile networks, banks, and ATMs. Bim, as it is commonly known, aims to attract five million unbanked Peruvians as users in five years. For a small fee, users can transfer money to any Peruvian bank account, deposit or withdraw cash through any agent and make cashless payments for goods and services to thousands of merchants. More than 70% of Peruvians lack access to bank accounts.
Results & Impact
More than double the number of expected users signed up during Bim's first month, totalling 23,000. Once Bim has become fully established, it expects to have 2.1 million regular users.
Peruvian Government, Peruvian Digital Platforms, ASBANC, Better Than Cash Alliance, Banco de Credito del Peru, Interbank, BBVA Continental, Scotiabank, Banco de la Nacion, Movistar, Claro, Entel, G-Money, Banco Financiero, Credinka, Servitebca, Jupiter, Wanda, Telefonica
In 2013, Peru simplified regulations for small volume online accounts, creating a clear regulatory framework for electronic payments systems like Bim to take shape. A consortium of the country’s major banks, engaged telecom providers and technology companies formed to create a digital payment system that could work across all ATMs, banks and agents and operate through a mobile phone. Focus groups were conducted to test the new system and improvements were made to simplify the user experience in line with findings. Bespoke services were developed by each participating financial institution to compete for market share on the platform.
Cost & Value
Running since 2015
Achieving buy-in from all major banks and financial service providers was difficult. This was made possible by building up a critical mass of participating organisations so that exclusion from the new system became a commercial impediment. Developing an acceptable project management system was also problematic as there was a risk larger banks would seek to dominate the scheme. However it was eventually agreed to split investment and control equally between participants.
Around 300 accessible mobile payment systems have been launched worldwide, with the vast majority failing to take off. Southern Africa’s M-Pesa is the most successful to date, but has struggled to incorporate poor rural communities due to its limited operability and payment structure.
The Peruvian government has partnered with over 30 financial institutions and mobile networks to create the world’s first national mobile payments system that operates across all networks, banks and ATMs, to target people lacking banking services.
For a small fee, users can transfer money to any Peruvian bank account, deposit or withdraw cash through any agent and make cashless payments for goods and services with thousands of merchants.
The scheme aims to extend banking services to five million of the estimated nine million Peruvians without accounts over the next five years. Bim exceeded its initial take-up target of 8,000-10,000 users, signing up 23,000 people within its first month. Some 2.1 million Peruvians are expected to become regular users once it is fully rolled out.
Expanding cashless payments has been a major priority of the Peruvian government for a number of years. In 2013, it passed a law to stimulate the development of electronic money systems by simplifying regulations for small volume online accounts, creating the regulatory framework for a system like Bim to take shape. This was followed in August 2015 with the publication of a National Strategy for Financial Inclusion, which mapped out a path to provide payment accounts to 75% of Peruvians by 2021. Given that 65% of Peruvians without a bank account have mobile phones, they offered an ideal mechanism to improve financial inclusion.
Bim is the centrepiece of Peru’s strategy. Behind it are a consortium of over 30 financial and telecommunications groups, including all of the country’s major banks and the three most prominent mobile network providers. It was developed and run by Peruvian Digital Platforms (PDP), an entity jointly owned by the financial service providers and ASBANC (the Association of Banks of Peru). ASBANC is the largest single shareholder and main co-ordinating entity behind the project.
Bim is available on all smart and feature phones operated by one of the three participating networks. Users can sign up for accounts and services provided by any of 26 financial entities. These allow people to transfer money to any Peruvian bank account, make payments, check balances and pay for mobile credit. Cash can also be deposited and withdrawn through 10,000 servicing stations located throughout the country. Transfers are made by sending text messages and even allow money to be sent to people without accounts by using designated agents as collection points.
Although numerous mobile payment systems have been launched before, many have failed or experienced limited growth due to their being stuck in a “closed-loop.” This means that payments can only be made to other users on the same network and payments to bank accounts are restricted. Prior to Bim, several Peruvian banks launched their own mobile payment systems which suffered from this problem and failed. Therefore, there was a willingness amongst financial institutions to collaborate to create a unified payment system that encompassed all banks, payment agents and mobile networks, rather than fighting for market share. As more banks chose to join in, others became fearful of being left out, allowing a large coalition to develop.
The main incentives for banks are a mixture of philanthropy and market share. Although a nominal transaction fee is levied for each transfer payment, this is capped by the government and is far lower than agents charge. Bim is expected to run at a loss through 2019, after which it will become profitable, with banks able to make small profit margins on the network.
However, with up to 60% of Peruvians in urban centres lacking bank accounts and the potential for Bim to connect regular customers with those in rural areas, the opportunity for banks to capture a large swathe of new clients has been a powerful factor. Added to this was the chance to improve the reputation of an industry that suffered from a poor public perception. Although the services offered on Bim are largely uniform, it is hoped the competition for clients will lead banks to launch new and differentiated products specifically designed for the platform.
Bim’s interoperability and payment mechanism are allowing its impact to exceed that of even the most successful mobile payment systems elsewhere. M-Pesa is arguably the most famous. Launched in 2007, it has spread across southern Africa. In 2014 alone, the platform’s transactions exceed $656 million. Despite this, millions remain excluded and its growth rates have slowed. Despite being a decade old, interoperability across service providers and countries remains limited and has only become possible relatively recently. Payment mechanisms have also been problematic. Some networks operate M-Pesa through an agent payment model, with each transaction having to be processed by an approved agent. Transactions of a few dollars are therefore uneconomical as the profit margin would require an agent to conduct an unrealistic number of payments. M-Pesa has therefore struggled to take off in poorer, rural areas. Bim was designed with the flaws of pre-existing payment systems in mind, allowing Peru to benefit from its late move into mobile banking networks.
(Picture: Wikipedia/Bank BCP ATM Huarez)