End of the year moved for the electronic payments market. Traditional banks and cards they weave alliances to challenge the leadership of Payment Market, the financial arm and the most prosperous business unit of Mercado Libre. In the coming days, resounding launches planned of new digital wallets and apps, and in parallel, the Central Bank is rushing a new regulatory framework to limit the use of cash.
Until 2019, 90% of the operations were carried out in cash. But the pandemic and quarantines accelerated the adoption of digital means of payment and online shopping. According to the Fintech Chamber, today there are 8 million CVUs (the passwords of the wallets equivalent to the CBU or aliases of the banks), 2 million businesses that accept mobile payments and some 4 million cards issued by apps, such as Ualá, Mercado Pago and Naranja X.
Those numbers grow depending on the arrival of new players. The market awaits with expectation the debut of Modo, the compatible wallet promoted by public and private banks and which will hit the market before the end of the year. Almost simultaneously it is planned the irruption of Bimo, another alternative that arose from the alliance between the 365 Program Clarion Y Prisma group, owner of Visa. “With Bimo, the user, in addition to being able to load all their means of payment, you will access 365 discounts without the need to present the physical card ”, they explained.
This new digital wallet differs from the rest as it complements 365 promotions, Prisma’s payment methods technology and its network with more than 400,000 member businesses, an integrated system through a new QR code. For its launch, scheduled for mid-November, “those who download Bimo and are not 365 subscribers will have enabled a free 365 virtual card for a limited time, ”they added.
These two initiatives come together in a market that is reconverting rapidly. In the sector they calculate that there are at least 60 fintechs focused on the electronic money business, with different focuses. In this universe, the leader is Mercado Pago, but other digital wallets also stand out, such as Uala, DNI account (Banco Provincia), Naranja X (from the Galicia group), Vale Pei (Red Link), Todo Pago (Prisma) and Moni. “The Argentine financial market is small but the number of players is proportional to the chances”, Summarized the CEO of Naranja X, Gastón Irigoyen.
The pandemic accelerated the plans of companies, many behaviors, but the attraction of cash is a great obstacle. The crisis boosted financial inclusion, as many social plans (IFE and AUH, among others) were channeled mainly through public banks. In the market they calculate that 85% of the population have a bank account. However, the vast majority are inclined to withdraw money from ATMs, which implies higher expenses for the State, users and also businesses.
A revealing case is the DNI Account. Launched 6 months ago, the province’s mobile app has 2.3 million users. With the wallet you can pay for purchases directly in digital form but it also allows you to withdraw cash from the ATM without having a physical debit card. “In the last 4 months They were made 3.3 million extractions under this modality for a total of $ 25,000 million ”, says a statement from the entity.
The use of digital wallets to pay facilitates operations, since the system transfers the money from the user’s account directly to the merchant through the cell phone. Not only that, but they are also free, for which “Argentina is in a good position”, remarks Irigoyen. Not just because They have no cost, but because they are immediate. In this regard, Irigoyen explains that “in the United States, bank transfers take 1 to 3 days and cost between US $ 5 and US $ 20”.
Perhaps because of these advantages, the Brazilian group Itaú-Unibanco launched in the country Ank, its digital wallet, earlier than in Brazil. The project takes two years and is led by former OLX Leonardo Rubinstein, whose mission is develop the application and test it, to later export it to the entire region. Strictly speaking, Ank is a payment integrator for banked users. Initially it will allow a validated user send money to anyone, even if you don’t use the platform, just by knowing your CBU or alias. “Then other services will be added: payments, investments, savings and even financial planning,” he listed.
Aware of the proliferation of alternatives, Mercado Libre finally reacted: days ago, it launched a strong advertising campaign through graphic media, radio, TV, and social networks to relaunch Mercado Pago. Marcos Galperin’s unicorn fintech has 4 million users, 1.3 million businesses attached to its QR code system and 2.1 million devices to charge with a card from the cell phone.
The promotion coincides with the launches of Modo and Bimo and aims, basically, to highlight the variety of services concentrated in a single platform: means of payments, credits, investments and money transfers, among other things. Mercado Pago also plans to add the insurance offer, for which it is looking for partners in the traditional market. It is the first advertising campaign carried out by the oldest and most popular fintech in the country.
The emergence of so many competitors is not so surprising, says Irigoyen. “It happened before with coupons and also with eCommerce. 20 years ago, there were more than 70 e-commerce companies, of which very few survived”, He says. The executive describes that at the beginning there are many players, of which some manage to consolidate and then the market concentrates. “They are logical stages of the conversion processes of an industry”, He described.
The current problem of the financial system, underlines the CEO and founder of Moni, Juan Pablo Bruzo, is not the level of bankarization of the population or the supply of digital services. “What happens is that people prefer cash.” In his opinion, the emergence of new startups and modalities to operate electronically should be watched carefully. For instance, Mastercard pioneered the prepaid plastics business. “Now International Visa is fully involved,” he says to later clarify that “this is a marathon and not a 100-meter race.”
3.0 transfers: a new framework
With the aim of promoting digital transactions, the Central Bank will promote a new regulatory framework to promote the use of wallets and digital operations. Since last week, the entity led by Miguel Pesce circulated a draft between banks and fintech, which has the title “Transfers 3.0” in order to collect opinions and recommendations in the industry itself
Basically, the BCRA tries to reduce the use of cash due to its high costs and the difficulty of controlling evasion. With mobile payments, according to sources in the sector, the Government tries to lower the commissions paid by businesses and eliminate some sections of intermediation, such as the use of the debit card in the purchase processes.
One of the key aspects is the creation of a “Standardized Payment Interface (IEP)”, which implies that any business will be able to accept payments from any digital wallet. That is, all businesses that use the Mercado Pago QR code will be able to accept transfers from a Modo user. In the jargon they say that this way the system will become “interoperable”.
In general terms, the sector agrees that the regulation will not impact their businesses. They believe that interoperability will drive faster user adoption and that “that will add to the cake.” How? If a user of Modo pays at a business attached to Mercado Pago, they distribute commissions. “Before, that possibility did not exist,” reasoned a qualified source from Marcos Galperin’s company.
The biggest obstacle, however, comes neither from the traditional financial system nor from the fintech world. “The biggest obstacle are the gross income withholdings applied to wallets by the provinces”, They indicated to this newspaper from the Central. To put it another way. Since 2017, electronic transfers between one account and another are free. But there are districts that retain a portion, as a tax advance, which represents an additional cost for electronic payments. Something that does not happen with cash.
The BCRA indicates that this extra cost in digital operations is “the only thing that slows the launch of the new regulations.” For this reason, the entity “will demand that the provinces withdraw the withholdings for smaller businesses. The reasoning is that it has no effect on collection and it will push the boys to accept the wallet, generating in the process a greater laundering of the economy ”.
The new regulatory framework is advanced and has the endorsement of almost all companies in the sector.