Driving to Scale: Bim’s Journey to Digital Financial Inclusion in Peru

Felipe Vásquez de Velasco, General Manager of Peruvian Digital Payments (PDP)

Peru launched the first interoperable mobile money platform in the world, with the aim of promoting financial inclusion.

Now, two years later, Felipe Vásquez de Velasco, General Manager of Peruvian Digital Payments (PDP), talks about the main achievements and lessons learned. His company, which engages with most of the country’s financial sector players, is responsible for processing transactions with the Billetera Móvil (Bim) electronic wallet.

First, what prompted the launch of electronic wallet Bim in Peru?

Peru is one of the countries with the best environments for financial inclusion. However, it still faces important challenges. Only 43 per cent of Peruvians have a deposit account in the financial system. And 31 per cent of the country’s districts, especially those in rural areas, still lack formal financial institutions.

Given this reality, both the government and the private sector are looking for innovative solutions for a quantitative and qualitative leap forward in terms of access and use of financial services.

That’s why, just two years ago, Bim was established. The mobile wallet, interoperable between its issuers and the three most important mobile telephone networks in the country, was initially offered by nine electronic money issuers. As of today, 25 issuers have joined the platform.

What have been the main achievements to date?

Bim has made important advances. In addition to the person-to-person (P2P) transfers, various functionalities have been added, such as purchases, virtual mobile top-ups, supplier payment and payment for services. And one of the highlights is the simplified income tax (SIT) payment, a scheme adopted by individuals and micro-enterprises.

Bim has significantly increased the number of cash in/cash out points last year. That is why at the beginning of 2018, Bim already had a network of over 10,000 nation-wide points of service between agents and ATMs of the issuers who are more actively involved in the initiative.

After a slow first year, the number of transactions on the platform grew by 30 times in the second. From 8,000 transactions made in November 2016, they increased to more than 245,000 in June 2017. The catalyst for this increase was the use of Bim for the payment of mobile top-ups. However, this growth has not yet translated into an increase in the use of Bim for other types of transactions, such as P2P payments or person-to-business (P2B) payments. We would certainly like to see that, of course.

Could P2P transactions drive the increase in the number of transactions and users?

A look at the Peruvian market for internal remittances has allowed us to observe that Bim could become a competitive alternative to person-to-person payments.

On this issue, we are working with the Better Than Cash Alliance. This global partnership works with Peru, which is one of its founding members, to develop an inclusive digital payments ecosystem in the country. As part of this support, the Alliance has provided us with technical assistance for the development of a strategy and a roadmap with concrete opportunities to increase P2P transfers through Bim.

Bim offers low rates for P2P transactions compared to the existing formal alternatives. In addition, the service offers the security not provided by the informal modalities currently dominating this market in Peru. In order to enter this market, it was recommended to focus on specific segments of the population that would catalyze mass adoption of Bim. To this end, our company worked with electronic money issuers that use Bim in identifying these segments and in the initial development of three pilot projects. The selected segments were: the beneficiaries of a national university scholarship programme, the micro-entrepreneurs of the most important textile cluster in the country, and the farmers participating in an agricultural insurance programme. In each of these pilots, users would receive a regular payment in their wallets, which is expected to stimulate the use of Bim for other transactions.

Although the study focused on P2P transactions, the analysis identified several cross-cutting challenges and made recommendations with respect to the overall P2P strategy. These recommendations were based on the analysis of successful cases for usage of mobile wallets, such as Tigo in Paraguay and M-Pesa in Kenya.

What strategies does the study recommend to improve the person-to-person transactions offered by Bim?

First, focus on the specific needs of the user. This would allow, on the one hand, to align the priorities of PDP with that of the participating issuers and, on the other, to send a clear message on the advantages of Bim. It is essential not to lose sight of the needs of Bim’s target audience, that is, those who inspired the implementation of this initiative: the sectors that do not have adequate access to financial services.

Second, improve the user’s experience at the points of service. Research corroborated that the level of the quality of services provided by the agents was not homogeneous, nor were the services offered to the user, since these depend on the corresponding issuer.

Third, there is a need to strengthen the ecosystem and investing resources in it. The experience of mobile wallets, in countries such as Kenya and the Philippines, informs that this business requires patience and a significant investment to generate the ecosystem required to reach scale. This implies that some of the participating issuers renew their initial commitment with Bim and that long-term efforts to ensure the success of this initiative are boosted.

Do you think that these recommendations can be useful for financial service providers in other countries? Why?

Certainly. Bim’s operating model has raised the hope that a collaborative and multioperable scheme can overcome the problems that have hampered the adoption of mobile money in other countries and can stimulate financial inclusion. Capturing the market for P2P transactions through Bim could be a big step in this direction.

At the regional level, the lessons drawn from the Bim study and experience would be useful for countries that are implementing regulatory frameworks for e-money issuers such as El Salvador, Honduras, Colombia and Paraguay. Indeed, it would be good to share experiences from electronic money providers who face similar challenges, or those who are about to, as in Argentina.

Globally, we are following with great interest what is happening in India and the Philippines where digital wallets will be key in the disbursement of government payments, and where social payments will be included. Certainly, this type of payment represents a major challenge due to geography, the lack of financial infrastructure and public services (i.e. energy and telecommunications), as well as the fact that the mobile wallet users are not tech savy.