Last week, Dr. Jerry Haar of Florida International University wrote this compelling piece about mobile money in Latin America. Conditions are right for converting a large portion of the region’s population – existing mobile phone users without bank accounts – to mobile financial customers.
Stakeholders agree on something else: Remittances will play a big role in rolling out mobile money in Latin America.
This stands to reason. More than $60 billion of remittances are sent to Latin America and the Caribbean (LAC) on an annual basis. Remittances to LAC dwarf foreign direct investment in the region, and they are expected to multiply over the next five years.
But U.S. Hispanics are not adopting the mobile channel for the purpose of sending money. They continue to use traditional money transfer services like Western Union and MoneyGram. In fact, underbanked Hispanic migrants are more inclined to adopt digital reloadable cards than mobile financial services.
Moreover, market leader Western Union is reluctant to push the mobile channel onto their customers. The money transfer multinational controls approximately 26 percent of the U.S.-to-LAC remittances market. Since mobile money transfer is a cheap and safe alternative to traditional remittance services, the mobile channel poses a threat to Western Union’s core business, which relies strategically on its agent networks.
Mobile money is the future. But the role of remittances will help determine when mobile money will truly explode in Latin America.