Mobile and Alternative Payments in Mexico

  • April 2013
  • -
  • Packaged Facts
  • -
  • 150 pages

The Mexican consumer financial services landscape is in the midst of great change, driven by the confluence of technological innovation, innovative forms of branch expansion, regulatory changes in consumer deposit accounts and bank cards, and a strong push to facilitate mobile banking and payments. Indeed, major banks and telecommunications companies, most notably Telcel, have launched mobile banking and payments platforms that we expect to gain significant traction in 2013. At stake is the transformation of the Mexican banking system—from remittances to redefining branch banking—which can address longstanding financial inclusion disparities by reaching tens of millions of consumers heretofore unable to participate in formal banking services.

Mobile and Alternative Payments in Mexico provides industry participants with the wealth of analysis and guidance they need to stay abreast of this quickly evolving market and help gauge its potential. Report coverage highlights include the following:

To place mobile payments in context, the report contains broader analysis of Mexican payments and consumer payment choices, including market sizing and issuer shares for credit cards and debit cards, and market sizing guidance on prepaid cards. We also analyze trends related to correspondent banking and branch expansion.

Assessment of mobile phone/smartphone penetration, consumer banking relationships, online banking, mobile banking and payment usage and interest, and mobile shopping and financial education interest, supported by results of our proprietary survey of Mexican adult consumers.

Insight into remittance senders’ banking relationships, method of sending remittances, method of friends or family receiving remittances, and rationales for choosing, supported by proprietary interviews of Mexican immigrant remittance senders residing in the U.S.

Insight related to Mexican residents’ sending and receiving international and domestic remittances, including sending method and amounts sent, supported by results of our proprietary survey of Mexican adult consumers.

We also analyze Mexican mobile banking and payment products and strategies being initiated by major banking and nonbanking players, including Banamex, Banorte, Santader, BBVA Bancomer, Telecomm-Telegraph, MasterCard, Visa, Wells Fargo, Grupo Elektra, and PayPal. To complement the report’s emphasis on mobile banking and payments, we include analysis of leading mobile phone operators, including Telcel, Nextel, Iusacell and Telefónica Móviles México.

Table Of Contents

Executive Summary
Report Scope
Report Summary
Market opportunity
Mexican payment trends
Electronic payments make strides, but cash remains King
A strong, entrenched cash culture
Even among banked consumers
Demand deposits more popular
Level I accounts make a splash
Growing branches, ATMs and correspondent banks: BBVA Bancomer on top
Check transactions decline, while credit cards and debit cards gain
Prepaid cards: new to market, but making inroads
Proprietary survey results underscore power of cash, potential of banking relationships
Mexican internet and mobile phone usage trends
Broad-based telecommunications growth
Internet usage increasing, but still capped at 36% of population
So why not go mobile? Everyone’s got one
Smartphone penetration approaching 20%
Internet-connected adults have smartphones; non-connected don’t
Among internet-connected, income and region shape mobile and smartphone penetration
Telcel reaps 70% subscription share
Mexican mobile banking and payment trends
Lots of mobile phones, little financial inclusion
Government data reveals seeds of online banking usage
Proprietary survey analysis: mobile banking/payments have already taken root
Account engagement leads payments
P2P usage could be 3.7 million
But most consumers interested in SMS text payments
Other methods also of interest—but technology will need to catch up
Interest in mobile shopping and mobile phone public transportation payment
Smartphones are strong usage differentiator, but interest among non-smartphone users
Mexican mobile remittance trends
U.S.to-Mexico remittances top $23 billion but mobile is not a factor
Costs declining; internet method is cheapest
U.S. immigrant remitter interviews: banked and connected; but banks and internet not used
Internet-connected Mexican adults engaging in international remittance/P2P
Domestic migrant remittance market undervalued and underserved
Domestic remittance/P2P a different demographic animal
Key market participant: Telecomm-Telegraph
Key market participant: Xoom
Key market participant: MoneyGram International, Inc.
Key market participant: Western Union
Mobile and alternative payments strategies: financial institutions
American Express
MasterCard
Visa
Banamex
Banorte
BBVA Bancomer
Santander
Mobile and alternative payments strategies: other institutions
America Móvil
Telefónica Móviles Mexico
Grupo Elektra
PayPal
MercadoPago

Chapter 1: Overview
Financial system
Regulation of the Mexican financial system
Mexican payments infrastructure
ATM and POS networks
Financial institutions participating in consumer banking and payments
Commercial banks
Development banks
Correspondent banks
SOFOME
SOFOL
Telecommunications regulation
Increasing mobile telecommunications competition
Telecommunications reform bill

Chapter 2: Market Opportunity
Future is bright for Mexican mobile payments
Closing the financial services gap by connecting to 57 million more people
Table 2-1: Financial Institution and Mobile and Electronic Payment Opportunity Analysis: 2012
Challenge: the rural and impoverished
Table 2-2: Computer, Landline Telephone, Cell Phone and Internet Penetration, by Size of Locality: 2010
Poverty is a part of the equation
Graph 2-1: Poverty in Mexico, 2012
Table 2-3: Mexico Urban and Rural Poverty headcount Ratio: 2011
Per capita growth ahead
Table 2-4: Historical and Projected GDP and Population Growth in Mexico: 2006-2015

Chapter 3: Mexican Payment Trends
Summary analysis
Electronic payments make strides, but cash remains King
A strong, entrenched cash culture
Even among banked consumers
Demand deposits more popular
Level I accounts make a splash
Growing branches, ATMs and correspondent banks: BBVA Bancomer on top
Check transactions decline, while credit cards and debit cards gain
Prepaid cards: new to market, but making inroads
Proprietary survey results underscore power of cash, potential of banking relationships
Payments trends
Mexico credit card and debit card volume share of GPD is one-fifth that of U.S.
Graph 3-1: U.S. And Mexico Credit Card and Debit Card Volume as Percentage of Country GDP: 2008-2012
U.S. and Mexico credit card and debit card volume share gains over time
Table 3-1: U.S. And Mexico Credit Card and Debit Card Volume as Percentage of Country GDP: 2008-2012
Demand deposit accounts
Transaction accounts, savings accounts and term deposit accounts
Demand deposit ratio improves
Basic accounts
Basic credit cards
New account structure plays a role
Traditional checking accounts dominate account and balance share
Table 3-2: Mexican Demand Deposit Accounts, Account Balance and Share, by Account Type: 2012
Mobile account application
BBVA Bancomer draws most Level I accounts and balances
Table 3-3: Level I Demand Deposit Accounts, Account Balance and Share, by Bank: 2012
Branch and ATM network analysis
Table 3-4: Number of Mexico Bank Branches and ATMs: 2008-2012
But banks reaching more and more via expanding ATM network
Banking branch and ATM leaders
Table 3-5: Number and Share of Mexico Banking Institution Branches and ATMs: 2012
Correspondent banking takes off
Checks
Transactions decline; volume flat
Table 3-6: Mexico Check Market Size: Cards, Transactions, Dollar Volume: 2008-2012
Credit cards
Credit card growth rebound
Table 3-7: Mexico Credit Card Market Size: Cards, Transactions, Dollar Volume: 2008-2012
Credit card market share
BBVA Bancomer, Banamex and Banorte card share grows
Table 3-8: 2012 Credit Card Market Share, by Commercial Bank Issuer: Number of Cards,
Balances and Volume
Casting a wider net
BBVA Bancomer, Banamex and Santander dominate
Table 3-9: 2012 Credit Card Market Share, by Commercial Bank/SOFOMER: Volume and Number of Cards
Spurring uptake with basic credit cards
Debit cards
Consistent, healthy card and transaction growth
Table 3-10: Mexico Debit Card Market Size: Cards, Transactions, Dollar Volume: 2008-2012
Table 3-11: 2012 Debit Card Market Share, by Commercial Bank Issuer: Number of Cards,
Balances and Volume
Prepaid cards
Historical growth
Future growth
Growth drivers
Bridging prepaid and mobile
Other players
Other payment mechanisms
Credit transfers
Electronic and internet banking transfers
Internet banking transfers
Survey analysis: consumer payments and banking relationships
Gender disparities noted
Table 3-12: 2013 Mexican Consumer Bank Account, Loan and Payment Card Penetration Rates,by Gender: 2013
Card usage trends upward with age
Table 3-13: 2013 Mexican Consumer Bank Account, Loan and Payment Card Penetration Rates,by Age: 2013
Regional disparities
Table 3-14: 2013 Mexican Consumer Bank Account, Loan and Payment Card Penetration Rates,by Region: 2013
By household income, credit card usage gap most pronounced
Table 3-15: 2013 Mexican Consumer Bank Account, Loan and Payment Card Penetration Rates,by HH Income: 2013
Cash, cash, cash! And then there’s everything else
Cash a majority choice in six of eight spending categories
Debit card and credit card uptake for household goods and appliances
Prepaid encroaching on public transportation and mobile phone bills
Table 3-16: Cash, Credit Card, Debit Card, Prepaid Card, Check and Money Order Usage,by Consumer Expenditure Category: 2013
Cash loses favor as income increases
Table 3-17: Payment Instrument Usage for Groceries, Gas and Restaurant Meals, by HH Income: 2013
Table 3-18: Payment Instrument Usage for HH Goods and Appliances, by HH Income: 2013
Table 3-19: Payment Instrument Usage for Mobile Phone Bills and HH Gas/Electric Bills, by HH Income: 2013
Regional disparities
Table 3-20: Payment Instrument Usage for Groceries, Gas and Restaurant Meals, by Region: 2013
Table 3-21: Payment Instrument Usage for HH Goods and Appliances, by HH Income: 2013
Table 3-22: Payment Instrument Usage for Mobile Phone Bills and HH Gas/Electric Bills, by HH Income: 2013

Chapter 4: Mexican Internet and Mobile Phone Usage Trends
Summary analysis
Broad-based telecommunications growth
Internet usage increasing, but still capped at 36% of population
So why not go mobile? Everyone’s got one
Smartphone penetration approaching 20%
Internet-connected adults have smartphones; non-connected don’t
Among internet-connected, income and region shape mobile and smartphone penetration
Telcel reaps 70% subscription share
Internet and mobile phone use trends
Telecommunications growth strongly outstrips GDP growth
Internet trends
40 million now use Internet—but penetration only 36%
Graph 4-1: Mexico Internet User Population and Population Share: 2003-2012
Lagging U.S. and Canada; in the middle of the Central and South American pack
Graph 4-2: Internet Users per 100 People in North America, Central America and South America,by Country: 2003-2012
Generational differences
Youth is driving usage penetration
Graph 4-3: Internet usage penetration, by age: 2012
Mobile phone trends
100 million subscriptions and counting
Graph 4-4: Mexico Internet Usage and Mobile Phone Subscription Penetration Rates: 2003-2012
Smartphone penetration low but should spike by 2015
Graph 4-5: Mexico Internet Usage, Smartphone Usage and Mobile Phone Subscription
Penetration Rate: 2012
Cell phone operator market share
Graph 4-6: Mobile Phone Subscription Share, by Operator: Q1 2013
Proprietary survey results
Smartphone usage chasm differentiates internet-connected and non-connected
Mobile phone usage and smartphone usage share
Among internet users, smartphone share above 80%
Table 4-1: Mexican Mobile Phone Usage and Smartphone Usage Share: 2013
Internet, mobile and smartphone usage penetration: demographic analysis
Table 4-2: Mexican Internet, Mobile Phone and Smartphone Usage Penetration, by Age: 2013
Mobile and smartphone penetration relatively high even among lowest income groups
Table 4-3: Mexican Internet, Mobile Phone and Smartphone Usage Penetration, by HH Income: 2013
Penetration rates high in urban center
Table 4-4: Mexican Internet, Mobile Phone and Smartphone Usage Penetration, by Region: 2013

Chapter 5: Mexican Mobile Banking and Payment Trends
Summary analysis
Lots of mobile phones, little financial inclusion
Government data reveals seeds of online banking usage
Proprietary survey analysis: mobile banking/payments have already taken root
Account engagement leads payments
P2P usage could be 3.7 million
But most consumers interested in SMS text payments
Other methods also of interest—but technology will need to catch up
Interest in mobile shopping and mobile phone public transportation payment
Smartphones are strong usage differentiator, but interest among non-smartphone users
Online bankers
Table 5-1: Internet Bank Transfer Users: 2008-2012
Online banking uptake among internet users
Online banking only a niche
Graph 5-1: Purpose of Internet Use, 2012
Online banking crosses the million mark
Graph 5-2: Population and Percentage of Online Bankers and Online Purchasers, 2012
1.7 million online payers, but less than 1 million make financial service payments
Graph 5-3: Types of Online Payments Made, 2012
Proprietary survey analysis
Mobile financial services current use and future interest
Current use: mobile payment, shopping and purchasing tools
Strong traction: current use of mobile payments and purchases
Graph 5-4: Percentage of Mobile Phone Users Who Performed Mobile Financial Services Tasks in Last 12 Months: 2013
Interest in next 12 months: mobile payment, shopping and purchasing tools
Interest in paying via SMS texting highly likely
But app- browser- and contactless payment interest also suggests promise
Graph 5-5: Mobile Phone User Interest in Performing Mobile Financial Services and Shopping Tasks in Next 12 Months: 2013
Current use and future interest: Smartphone and non-smartphone users
Mobile payment/shopping/purchasing use skews heavily to smartphone users
Table 5-2: Percentage of Mobile Phone Users Who Performed Mobile Financial Services Tasks in Last 12 Months: 2013
But sizeable interest exists among non-smartphone users
Table 5-3: Mobile Phone User Interest in Performing Mobile Financial Services and Shopping Tasks in Next 12 Months: 2013

Chapter 6: Mexican Mobile Remittance Trends
Summary analysis
U.S.to-Mexico remittances top $23 billion but mobile is not a factor
Costs declining; internet method is cheapest
U.S. immigrant remitter interviews: banked and connected; but banks and internet not used
Internet-connected Mexican adults engaging in international remittance/P2P
Domestic migrant remittance market undervalued and underserved
Domestic remittance/P2P a different demographic animal
Key market participant: Telecomm-Telegraph
Key market participant: Xoom
Key market participant: MoneyGram International, Inc.
Key market participant: Western Union
Mexican remittances market
Table 6-1: International Remittances Received from U.S. and Received by Mexico, by Country: 2012
Inflows over time: robust growth, following by rocky trending
Graph 6-1: Remittances Received by Mexico: 2003-2012
Remittance payment methods
Cash option
Credit card and debit card
Online and mobile
Globally, mobile remittance promise remains unfulfilled
Regulatory and operational challenges
Remittance costs declining
Costs of remittances at banks decline—now cheaper than a money transfer operator
Graph 6-2: Cost to Send $200 from U.S. to Mexico: Fees, Exchange Rate Margin and Total Cost,Q1 2010 to Q1 2013
Online methods generally cheapest; banks are in the middle
Table 6-2: Cost to Send $200 from U.S. to Mexico, by Remittance Service: Q1 2013
A window into cross-border remittance partnerships
Table 6-3: Cost to Send $300 from U.S. to Mexico, by Remittance Service,With Funds Collection Points: 2013
Proprietary survey analysis: U.S. immigrants remitting to Mexico
Participant analysis
Low HH incomes do not stop remitters from sending significant amounts
Connected to the internet and mobile
Majority are banked
Table 6-4: U.S. Mexican Immigrant Remitters: Basic Demographics, Banking Relationshipsand Amount Sent: 2013
But internet-driven methods to send money are not used
And yet few use banks to send money
Western Union: a popular choice, but complaints about cost
Table 6-5: U.S. Mexican Immigrant Remitter’s Primary Method of Sending Money to Mexico: 2013
Table 6-6: U.S. Mexican Immigrant Remitters: Primary Method of Receipt in Mexico: 2013
Cross tabbing notes
Qualitative participant assessments
Maria’s priorities: security for recipient; convenience and cost for sender and recipient
Miguel’s priorities: building a home in Mexico and gauging the exchange rate
Teresa: convenience and cost drive the decision
Carlos: no banking relationship, paid in cash, and an Intermex user
Proprietary survey analysis: Mexican international remittances/P2P
Remittance/P2P summary results
Table 6-7: Mexican Adult Internet Users Who Send/Receive International P2P Paymentsand Amounts Sent: 2013
Usage and amounts highest among 18-24s
Table 6-8: Mexican Adult Internet Users Who Send/Receive International P2P Payments and Amounts Sent,by Age: 2013
Amount sent/received highest among higher-income respondents
Table 6-9: Mexican Adult Internet Users Who Send/Receive International P2P Payments and Amounts Sent,by HH Income: 2013
Banks most likely receiving method; internet most likely sending method
Table 6-10: Primary Remittance/P2P Sending/Receiving Method: 2013
Domestic remittances
Untapped potential
Market opportunity larger than current industry receipts
Domestic remittance costs
Migrant domestic remittance demographics
Sending method
Banking products
Mobile remittances
Proprietary survey analysis: Mexican domestic remittances/P2P
P2P penetration near 40%
Table 6-11: Mexican Adult Internet Users Who Send/Receive Domestic P2P Payments and Amounts Sent: 2013
Table 6-12: Mexican Adult Internet Users Who Send/Receive Domestic P2P Payments and Amounts Sent, by Age: 2013
HH income analysis
Table 6-13: Mexican Adult Internet Users Who Send/Receive Domestic P2P Payments and Amounts Sent, by HH Income: 2013
Table 6-14: Method Used to Send and Receive Domestic Remittance/P2P Payments: 2013
Market participant analysis
Expanding points of access
Successful test case leads to wider rollout
Results demonstrate promise
Xoom
An enticing value proposition
Powerful, extensive partnerships in U.S. and Mexico
Mobile leadership
Online strength also a drawback
Revenue and costs
Growth analysis
Table 6-15: Xoom Sending Volume, Customer, Revenue and Income Metrics: 2008-2013
MoneyGram International, Inc.
Western Union
Services
Electronic channel growth and scope
Loyalty program and prepaid
Mexico volume decline

Chapter 7: Mobile and Alternative Payments Strategies: Financial Institutions
Card Associations
American Express
Minor Mexican presence
Payment diversification
Mexican differentiated products
MasterCard
PayPass
Security
PayPass global network growing fast, but remains small
PayPass Wallet Services . . .
. . . becomes MasterPass
Wanda
Mobile remittance platform launch in Mexico
Mexico prepaid launch
Visa
V.me
Priority 1: driving consumer adoption
Rollout with major U.S. banking and retail partners
PayWave
Latin America prepaid card push
Fundamo
Vodafone agreement
Mexican mobile banking
Banks
Banamex
iAcepta card reader and mobile application
Transfer payment platform expected to rocket to 1 million accounts
Off to a good start
Table 7-1: Transfer Contracts: 2012
Telcel phone number becomes a bank account
Grupo Financiero Banorte
Table 7-2: Grupo Financiero Banorte Branch, ATM, POS, Internet and Mobile Banking Metrics: 2010-2012
Credit card growth
Correspondent banking growth
Online banking
Mobile banking and payments
MiFon: a mobile payment application for underserved communities
Different from Banamex service
A rural success?
Cost
PagoMóvil: a mobile payment application for existing banking customers
BBVA Bancomer
Mobile Money
How it works
Additional features
Requirements and transaction limits
Santander
Supermóvil: a token-based mobile banking and payment solution

Chapter 8: Mobile and Alternative Payments Strategies: Other Institutions
America Móvil
Landline telephone and broadband
Wireless operations
Prepaid and postpaid
Rates
Data services growth
Networks and technology
Telefónica Móviles Mexico
Zero Prepayment campaign
M2M
Grupo Iusacell
Nextel Mexico
3G launch
Grupo Salinas
Grupo Elektra
Table 8-1: Primary Remittance/P2P Sending/Receiving Method: 2013
Alternative Payments and Emerging Wallet Payment Strategies
Google Wallet
Study it closely
Wallet 1.0: lots of fanfare; little success
Wallet 1.5: putting it in the cloud
Calling all cards
Save to Wallet feature
Online/offline integration: Enter the virtual prepaid card
Online purchases: ubiquity, courtesy of MasterCard
In-store purchase limited by NFC
Security enhancement
Wallet 2.0: Leapfrogging NFC with a physical card
PayPal
122 million accounts
More than 1.5 million Mexican accounts
Online and mobile capability
Mobile payment apps
In-store payment launched in U.S.
PayPal Here: POS payment solution
QR codes for Mexico
Volaris alliance
MercadoPago
eBay connection
Functions and services
Credit card reliance
Volume and revenue
Table 8-2: MercadoLibre Revenue and Usage Metrics: 2008-2012
Appendix
Consumer survey methodology
Packaged Facts Mexican Survey Demographics
Survey analysis by region
Smartphone
Market size
Report table interpretation
Abbreviations
Currency conversion
Terms and definitions

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