22 March 2018
Andres Fontao

Thoughts on digital banking

Andres Fontao - finnovista

7Posts 36,581Views 2Comments
Finextra community

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.

Cashless and cardless, take 2

14 January 2013  |  4557 views  |  1

Following up on my recent blog entry regarding my attempt to go cashless and cardless for a week when in San Francisco late last year, it’s worth sharing observations of payment methods from a recent trip to Argentina and Uruguay in late December 2012.

As those of you who know me, I am a strong advocate for mobile financial services, having spent a greater part of the past 7 years entrenched in the industry, working for different players in the ecosystem – bank, technology vendor, fintech start-ups and most recently a VC fund specializing in disruptive financial technologies (but more on that in a future post). As a practitioner, I have been mostly involved in bringing mobile banking and payment solutions to market in Western Europe, with broad exposure to deployments and strategies across the Americas. Based on my own experience, as well as the success stories being written in Africa and India, I have always been a strong proponent of mobile technologies being a driver for financial inclusion in unbanked societies. However, my recent trip exposed me first hand to the challenges that will be encountered along the road.

First and foremost, it’s important to consider the strong presence of cash. My observation in Argentina and Uruguay is that cash is still the preferred payment method in both countries. Makes sense: its legal, doesn’t require identification and has immediate value to the merchant/recipient, of utmost importance in economies like Argentina where inflation is sky high.

Related to this, I was surprised when we set foot in Uruguay to see that most merchants accepted four different cash currencies – US dollar, Argentine Peso, Uruguayan Peso and Brazilian Real – sometimes not accepting card payments. I have trouble managing my personal finances in a single currency; how on earth do gift stores, coffee shops and ice cream stands manage their business in four?!?!

While card penetration is significant (and growing) across the region, there seems to be little incentive to use them. In Argentina it was common to find retailers listing two prices, a list price when using a card as your payment method, and a discounted price when paying in cash. Card issuers try to counter this practice by offering interest-free payment installments over 6 or 12 month periods, but my observations in the two weeks I was out and about was that consumers preferred to pay in cash. Again, inflation plays a key role here as consumers rush to get the little cash they have off there hands before it is devalued.

After some additional research upon my return, I also learned that some countries, for example Colombia, are unwantingly de-incentivizing the use of electronic payment methods (cards among them) through tariffs that increase the cost to the consumer.

Lastly, personal safety and security are important as mobile technologies are considered a conduit to financial inclusion. In a trip to Colombia last August, I was told by local friends not to use my smartphone when out and about the city. If I did, I ran the risk of losing my phone, my hand, and sometimes even my life. I later learned that the black market for used (and stolen) technology is huge in developing countries. While nothing happened to me (or my smartphone) on that trip or subsequent trips throughout the region, I have observed that technology is not as widely used in open spaces. My recent exposure and experiences have brought me to realize that while technology can be a driver to inclusion and electronic payments, it is also a hindrance since the hardware itself is many times valued more so than cash itself (or even a life).

This being said, I am still a believer, albeit a bit more pragmatic about the importance that mobile and digital technologies will play in bringing financial inclusion to the unbanked.

TagsMobile & onlinePayments

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 16 January, 2013, 11:22


Props for a very balanced post. In a recent Finextra post The Death Of Cash Is At Least 190 Years Away, I'd highlighted the role played by friction in bringing cash back into online shopping in India, even for e-ticket booking and other wholly digital processes that hitherto supported only online payment methods. Despite online payments being free to the customer, cash-on-delivery is still the most popular method of payment in India, even in ecommerce. Against that backdrop, I can readily understand how tariffs imposed on online payments - like in Colombia as you've pointed out - can further distance mobile payments from mainstream adoption.

On another note, I didn't know that there were any success stories of mobile payments or mobile financial inclusion in India. Please enlighten. As things stand, only entities with a banking license can conduct banking, whether on mobile or in a branch. So, under the present regulatory framework, the presence of ~1B mobile phone subscribers does not automatically mean they can all become banked. It's more like, if they're already banked and their bank supports mobile banking - neither of which has anything to do with being a mobile subscriber - then they have the opportunity to become mobile banking customers.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Latest posts from Andres

My take on MWC2013

28 February 2013  |  4436 views  |  3 comments | recomends Recommends 1 TagsMobile & onlineInnovationGroupFinance 2.0

Cashless and cardless, take 2

14 January 2013  |  4557 views  |  1 comments | recomends Recommends 0 TagsMobile & onlinePaymentsGroupPayments strategies 2015-2020-2030

Is it time to leave the cash and cards at home?

19 November 2012  |  5364 views  |  0 comments | recomends Recommends 1 TagsMobile & onlinePaymentsGroupPayments strategies 2015-2020-2030

Gamification in banking

25 September 2012  |  6461 views  |  0 comments | recomends Recommends 1 TagsMobile & onlineGroupFinance 2.0

Customer journey is key to mobile payments success

16 April 2012  |  6582 views  |  1 comments | recomends Recommends 0 TagsMobile & onlinePaymentsGroupPayments strategies 2015-2020-2030

Andres's profile

job title Partner
location Madrid
member since 2011
Summary profile See full profile »
Empowering technology startups in the disruptive transformation of the financial services industry.

Andres's expertise

Member since 2011
7 posts2 comments
What Andres reads
Andres writes about
Mobile & onlinePaymentsInnovation
Andres's blog archive
2013 (2)2012 (5)

Who's commenting on Andres's posts