When it comes to payments in Latin America, real-time payments is a topic to be watched closely in 2021. Alongside banking as a service, the digitization of the unbanked and the SMEs, and the rising of contactless payments due to COVID-19, instant payments have the potential to override traditional payment methods, as it has been gearing up in the region.
With time, real-time payments may even displace cash and cards. In a recent webinar, Lindsay Lehr, payments practice director at Americas Market Intelligence (AMI), highlighted two key platforms that boomed during 2020: Brazilian PIX, the country’s Central Bank real-time payments system launched in November, and Yape, an app launched by Peru’s largest bank Banco de Crédito del Perú (BCP) in 2016. They both are true proofs of concept for peer-to-peer payments in Latin America.
Only one month after its launch, PIX reached overwhelming numbers: $23 billion in transactions – a much higher volume than the monthly average of $18 billion that go through credit cards, shows AMI’s data. Brazilians have been willing to use PIX. Up to April 30, over 230 million access keys were registered (each user can have up to three keys within PIX).
Unlike what happened with Brazil‘s PIX and Mexico‘s CoDi, where the idea was born based on a Central Bank structure and regulation, Yape came as a private real-time payments arm from BCP. Simultaneously, it is way larger than Colombia‘s Transfiya system, created by the fintech Minka and ACH Colombia, a company responsible for bank-to-bank operations in the country.
At first, Yape was only available for BCP’s clients as an easier way to make peer-to-peer payments. Later, in May 2020, when its rival PLIN was launched, all Peruvians could use it. That was the ace in the hole for Yape in a country with the lowest banking penetration and the region’s highest cash usage level.
Throughout last year, it scaled up, growing seven-fold its original size. It now has the equivalent of 62% of Peru’s banked population: 6.2 million users, of which nearly 800,000 are SMEs.
Like Yape, its competitor PLIN, owned by the financial services provider YellowPepper in partnership with Peruvian banks BBVA, Interbank, and Scotiabank, allows transactions 24 hours a day, 7 days a week, with no charge (even for merchants). Bank customers use PLIN through their respective mobile banking applications.
“You don’t pay anything to use Yape. For businesses that use card payments or other ways to pay, it’s amazing that you don’t pay anything using this kind of solution. And it is not only us. The rivals also don’t charge anything. We are experiencing this new technology, this new way of payments, so no one charges anything. And once it becomes something regular, that’s the moment when you start charging for the service,” explained Arturo Dongo Hernández, commercial manager at Yape, in an interview with LABS.
“I used to work in Beat, a taxi app, and when we got to Peru, we didn’t charge the drivers, for example. So it was free for a year. And everyone started using it. After that, we charge commissions. So I think that we are there right now [with Yape]. We are growing the business.”
The future of payments in all Latin America is instant
Ignacio Carballo, professor and director of Fintech Ecosystem at the Universidad Católica de Buenos Aires, is AMI’s Southern Cone Affiliate. He analyses how these real-time payments will combine the traditional payments infrastructure in the region. In Brazil, for instance, PIX may replace boleto bancário (a widely adopted payment voucher or bank slip that Brazilians use to pay bills and purchases). As Carballo told LABS, it is still unknown how these real-time payments will relate to physical point-of-sale (POS) and debit cards.
“The future of payments in all Latin America is instant. There are different ways of getting this, there are public ways, such as PIX in Brazil, and there are private ways such as Yape or consortiums like PLIN, with different banks in Peru,” he details.
In Argentina, in June 2020, the country’s largest private banks (Santander, Galicia, BBVA, HSBC) launched a fintech company called Play Digital to create MODO, a digital wallet that allows business transactions via smartphones and connects multiple banks accounts.
PlayDigital is the formal name of the consortium that created Modo, the mobile wallet that works similarly to PLIN. It provides a solution for account-to-account money transfers and in-store QR payments.
“We also have Transferencias 3.0 (a public infrastructure), which came with an interoperability QR Code and also instant payments with fixed fees. It was launched in December 2020, so it is pretty new; the question is whether the merchants will join. Will people pay with Transferencias 3.0 or with a normal debit card? This is for sure one of the most important trends to see in this 2021.”
Cannibalizing cash in Latin America
Would the Yape model work in other Latin American countries? According to Lehr, Yape’s success formula is basically an issuer with a high market share and strong brand recognition, allied with deep penetration within the Peruvian market and limited bank interoperability. That means, when banks are not working together, it is less likely to have the same type of operation as PIX.
Lehr says Uruguay, Paraguay, Bolivia, Ecuador, Guatemala, Honduras, Nicaragua, Panama, and Costa Rica are strong candidates for the Yape model in the region. Why? Because it has great potential in smaller markets with a solid leading bank and not so many fintech startups available.
“We grew fast, obviously because we have the support of the bank. It’s not like a startup that struggles to get money; we have the luck to have the bank behind us,” says Hernandéz. Yape’s team started with 20 people, and with BCP’s investment, it now has 150 employees focused on the app.
Yape has been transitioning more than PEN 1 billion soles (nearly $300 million) per month, and it aims to reach 40 million monthly transactions by the end of 2021, reaching 10 million users. “Our goal is to financially include all Peruvians. We are betting on these people that are not included in the financial system – nearly 80% of Peruvians.”
The Peruvian government is helping to boost Yape’s numbers. In April, it started to transfer the PEN 600 (nearly $165) aid to families most affected by the economic crisis unleashed by the coronavirus pandemic also through Yape.
In Peru, as in Mexico and Colombia, many small independent businesses, especially the so-called “mom-and-pop shops,” usually are not included in the financial system – many don’t use banking services and don’t pay taxes.
On the other hand, there’s a group of businesses that are the ones that pay taxes and account for 20% of the Peruvian economy. “If we look at Peru according to how many people have business bank accounts, maybe we can talk about 25%, 30% of all the economy. So we have more than 10 million businesses and people around there without a bank account.”
How to reach and scale P2M? That’s a task for Hernández. His job has to do with businesses in this traditional segment. “Right now, we are trying to reach markets all around Peru, not only in Lima. Peru is a centralized country, it’s like everything happens in the capital, and the other cities are forgotten. So we need to reach all the citizens in Peru. That’s why we are deploying teams in all the cities because if you only have businesses with Yape but no people with Yape, you can’t do the conversion. We need to grow in users and businesses. And that’s the secret that gave us the success we have right now.”
From a real-time payments provider to a super-app
The core business of Yape is peer-to-peer payments to people and small merchants. But a lot of big brands in Peru have been asking Yape to give them a solution. Besides transactions, what is possible to do with it? Right now, not much. But Yape is developing solutions for those big merchants and adding features to pay for housing services, and charge mobiles.
Yape has bold plans to become a super app or a neobank in the future. Recently, Yape’s CEO Luis Alfonso Carrera posted on LinkedIn an invitation to all banks to team up with Yape, and allow their clients to have Yape accounts. Currently, the real-time payments system also works for banked clients that have debit cards with Caja Trujillo, Caja Piura, Caja Cusco, Caja Tacna, Mibanco, CajaSullana, and Banco de la Nación.
“We had this referring program that pays you PEN 5 (around $1.37) each time you refer someone. That person made a payment; you received the money. It worked really well in the first phase of growth. Now Yape has been growing organically. At some point, I think that an app starts to develop by itself. It’s like it is so big you need to have it. Even people who don’t want it need to have it because people are trying to make payments through it.”