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Future Growth Potential of Mobile Money in Brazil: Market Profile

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"Demand dynamics in the Brazilian mobile financial services industry are promising. The market is changing rapidly with global competitors entering the country and developing new business models across customer segments. Although there are significant challenges in terms of regulation and the general adoption of mobile financial services, fundamentals such as an extensive branchless banking network and high rates of mobile penetration offer strong value propositions. Brazil has a developed financial sector, which creates a strong platform for emerging mobile money strategies. Due to its inflationary history, Brazil has developed a technologically advanced banking system with more than XX banks operating close to XX branches and a variety of access channels. Checks represent only XX% of non-cash payments in Brazil as electronic payment channels are preferred. Many people use informal and formal means of accessing finance, such as quasi-credit through retail shop cards and payroll-consigned loans. The state-controlled banks are commercially oriented and are mostly listed on the Brazilian stock exchange. "

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									                            Future Growth Potential of
                            Mobile Money in Brazil: Market
                            Profile
BRICdata
John Carpenter House
7 Carmelite Street
London EC4Y 0BS
United Kingdom
Tel: +44 (0) 20 7936 6400
                            Reference code: TC1004MP
Fax: +44 (0) 20 7336 6813   Published: April 2012

www.bricdata.com




                                                       www.bricdata.com
EXECUTIVE SUMMARY



1 Executive Summary
Brazil
          The Brazilian mobile payment market recorded 125 million transactions in 2011 with an average transaction size
          of US$0.8, and is set to reach over 2.4 billion transactions with average transaction size of US$5.3 by 2016.
          In value terms, the mobile money market is expected to reach US$12.6 billion by 2016.
          A large unbanked population supported by developed mobile and banking system will be the fundamental driver
          for the growth of mobile-based financial services in Brazil.
          The majority of mobile money initiatives are led by banks. The need to gain access to the potential market
          through the unbanked population is driving strategic business alliances between banks and mobile operators.
          The Brazilian retail industry is one of the most developed in Latin America, which is expected to provide a strong
          platform for the growth of mobile payment services.
          Brazil has a well regulated network of banking agents, who are authorized to carry out various banking tasks, and
          this well regulated agent network strengthens market fundamentals by providing strong operational infrastructure.
          Global competitors such as Telefonica, MasterCard, VISA and Paypal have been entering the Brazilian mobile
          payment market, which is expected to drive the overall development of the industry.
          There is an increasing trend of collaboration between banks to share operational infrastructure, focusing on
          reducing costs while improving levels of market penetration and launching new services.
          Credit and microfinance have emerged as potential markets for mobile money services.
          Brazil has great diversity across regions in terms of population, economy, household income and culture, which
          creates additional challenges for companies looking to offer unique solutions while building enough scale to
          generate a reasonable return on investments.




Future Growth Potential of Mobile Money in Brazil: Market Profile                                                     Page 2

© BRICdata. This product is licensed and is not to be photocopied                                        Published: April 2012
TABLE OF CONTENTS



TABLE OF CONTENTS

1         Executive Summary ................................................................................................................................ 2
2         Mobile Money Market Attractiveness of BRIC Nations ....................................................................... 6
2.1       Key Competitors, Business Models and Success Factors in the Mobile Money Ecosystem.................... 6
2.1.1 Key competitors and business models ..................................................................................................... 6
2.1.2 Critical success factors ............................................................................................................................. 8
2.2       Benchmarking of Mobile Money Market Environment in BRIC Nations .................................................... 9
2.2.1 Relative positioning of emerging markets with regards to the adoption of mobile money ........................ 9
2.2.2 Market attractiveness benchmarking in BRIC ......................................................................................... 10
2.3       Market Size and Future Prospects of Mobile Money in BRIC nations .................................................... 12
2.3.1 Benchmarking market size in value terms by financial services ............................................................. 12
2.3.2 Benchmarking Market Size by Volume of Transaction and Average Transaction Size .......................... 13
3         Mobile Money Opportunities in Brazil ................................................................................................. 14
3.1       Introduction to Mobile Money in Brazil .................................................................................................... 14
3.2       Mobile Money Market Size and Forecasts 2011–2016 ........................................................................... 16
3.2.1 Market size by value ............................................................................................................................... 16
3.2.2 Market size by volume and average transaction size ............................................................................. 17
3.2.3 Market size by financial services ............................................................................................................. 17
3.3       Key Drivers of Mobile Money in Brazil .................................................................................................... 18
3.3.1 Business and technology drivers ............................................................................................................ 18
3.3.2 Consumer drivers .................................................................................................................................... 20
3.4       Key Trends .............................................................................................................................................. 20
3.4.1 Business trends ....................................................................................................................................... 20
3.4.2 Infrastructure and technology trends....................................................................................................... 21
3.4.3 Consumer trends ..................................................................................................................................... 21
3.5       Challenges............................................................................................................................................... 22
3.6       Mobile banking regulations in Brazil ........................................................................................................ 22
3.7       Mobile Banking Services Launched in Brazil .......................................................................................... 23
3.7.1 Others ...................................................................................................................................................... 24
3.8       Case Example ......................................................................................................................................... 25
3.8.1 Oi Paggo ................................................................................................................................................. 25
3.8.2 Vivo 26
3.9       Future of Mobile Money in Brazil ............................................................................................................. 27
4         Appendix ................................................................................................................................................ 29
4.1       About BRICdata ...................................................................................................................................... 29
4.2       Definitions ................................................................................................................................................ 29
4.2.1 Areas of expertise ................................................................................................................................... 29
4.3       Methodology ............................................................................................................................................ 30
4.4       Disclaimer ................................................................................................................................................ 31




Future Growth Potential of Mobile Money in Brazil: Market Profile                                                                                               Page 3

© BRICdata. This product is licensed and is not to be photocopied                                                                             Published: April 2012
TABLE OF CONTENTS



LIST OF FIGURES
Figure 1: Mobile Money Value Chain – Key Competitors and Business Models ........................................................................................... 6
Figure 2: Mobile Money Market Evolution – Target Customer vs Market Penetration and ROI ..................................................................... 8
Figure 3: Relative Positioning of Emerging Markets – Mobile Payment Adoption and Maturity ..................................................................... 9
Figure 4: Attractiveness of BRIC Countries – Mobile Penetration vs Access to Financial Services ............................................................ 10
Figure 5: Relative Positioning of BRIC – Market Competitiveness vs Regulatory Readiness ..................................................................... 11
Figure 6: Mobile Money Market Potential in BRIC – Breakdown by Key Financial Services, 2016 ............................................................. 12
Figure 7: Mobile Money Market by Volume of Transaction and Average Transaction Size, 2011–2016 ..................................................... 13
Figure 8: Brazilian Mobile Money Market Size by Value, 2011–2016 ......................................................................................................... 16
Figure 9: Brazilian Mobile Money Market Size by Volume and Avg. Transaction Size, 2011–2016 ............................................................ 17
Figure 10: Brazilian Mobile Money Market Size by Financial Services, 2016 ............................................................................................. 17
Figure 11: Mobile Users in Brazil (Million), 2007–2016 .............................................................................................................................. 19




Future Growth Potential of Mobile Money in Brazil: Market Profile                                                                                                             Page 4

© BRICdata. This product is licensed and is not to be photocopied                                                                                          Published: April 2012
TABLE OF CONTENTS



LIST OF TABLES
Table 1: Value Proposition and Competitive Positioning in Mobile Money Market ........................................................................................ 7
Table 2: Mobile Payment Development in Brazil based on Scope of Services Offered............................................................................... 14
Table 3: Key Drivers of Mobile Money Market in Brazil .............................................................................................................................. 15
Table 4: Mobile Banking Services Offered by Leading Brazilian Telecom Operators and Banks ................................................................ 23
Table 5: BRICdata Mobile Money Definitions ............................................................................................................................................. 29




Future Growth Potential of Mobile Money in Brazil: Market Profile                                                                                                                Page 5

© BRICdata. This product is licensed and is not to be photocopied                                                                                             Published: April 2012
MOBILE MONEY MARKET ATTRACTIVENESS OF BRIC NATIONS



2 Mobile Money Market Attractiveness of BRIC Nations
Large unbanked populations and low income groups with limited access to financial services are driving the attractiveness
of the mobile payment industry at a fundamental level among BRIC nations. The mobile payment ecosystem is developing
rapidly with a series of competitors across the value chain entering the market.
This chapter comprises three sections focusing on defining the fundamentals in emerging markets and evaluating the
attractiveness of the market by taking into account a series of important parameters for the mobile payment industry. The
focus is primarily on BRIC countries with an overview of other emerging markets. Section 2.1 defines evolving models and
critical success factors in BRIC countries. Section 2.2 evaluates the attractiveness of BRIC countries on the basis of the
overall market environment, taking into account factors such as mobile penetration, market competitiveness, regulatory
readiness and access to financial services. Section 2.3 compares BRIC countries on the basis of market size and future
growth potential. This takes into account factors such as market size in value terms, transaction volume, average
transaction size and breakdowns by financial services.

2.1 Key Competitors, Business Models and Success Factors in the Mobile Money Ecosystem
Over the last few years, a number of competitors have emerged in the mobile payment industry, making the entire
landscape a complex mix of services, technologies and business models. BRICdata‟s analysis of the mobile money
market suggests that four markets – banking / financial services, telecommunication, online competitors and retail – will
define and control the primary value chain of the industry.

In terms of market dynamics, BRICdata expects that a focus on building an optimal pricing structure, which can be
attractive to end-customers as well as agents, and interoperability will be the key success factors in the industry.
2.1.1 Key competitors and business models
Mobile operators with access to the unbanked population, and banks with access to financial systems, are the obvious
partners in this industry. However, the market is attracting a number of other competitors such as payment processing
firms (Mastercard and VISA), telecommunication vendors (Nokia and Ericsson), online firms (Google and eBay), and other
competitors (m-check in India and Wizzit in South Africa).
Business models are primarily being built around the unbanked population and low income groups, however, there is a
definite focus on the banked population. The following figure shows the value chain of mobile money, outlining key
competitors and their role:

 Figure 1: Mobile Money Value Chain – Key Competitors and Business Models

          Role and                                   Retail           Banking           Payment              Network
                                    Issuer                                                                                       Merchant
                                                     Agent            Support          Processor             Provider
          Example

                            Build mobile money    Cash              Regulatory        Transaction         Connecting             Accept and
                            product               management        compliance        platform            customer device        settle payments
                                                                                      management          and mobile wallet
                            Issue mobile wallet   Primary contact   Converting
    Primary Function
                                                  with customers,   deposits to                           Provide account
                            Manage customer       facilitating      electronic cash                       and transaction
                            relationship          transactions                                            information


                            Mobile Operators      Agents            Banks and         Mobile              Mobile Operators       Wide range of
                                                                    Financial         Operators                                  retail outlets
                            Banks                 Retailers         Institutions
                                                                                      Banks                                      Utilities
    Type of Players in      Payment Platform      Bank Branches
    Emerging Markets        Owners                                                    Payment                                    Government
                                                  Mobile Airtime                      Platform Owners                            agencies
                            Other Specialists     Distributors
                                                                                      Other Specialists



Source: BRICdata Analysis                                                                                                                    © BRICdata




Future Growth Potential of Mobile Money in Brazil: Market Profile                                                                              Page 6

© BRICdata. This product is licensed and is not to be photocopied       
								
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