mPayments in LatAm: regulating the virtual gold rush

rafapellonRafael Pellon, General Manager of MEF LatAm and partner of FAS Attorneys at Law, discusses the role of regulation in m-commerce in the Latin American Market

Given the many new payment methods coming out every week in the industry press, usually employing a different technology ranging from the simple (and effective) SMS to the increasingly sophisticated apps in smartphones, it would appear that the mPayment trend is here to stay.

Pity the end user of mobile services, the average consumer, who is becoming increasingly lost among the many acronyms that frequently accompany every new service (NFC, IRIS, Wanda and many others), the endlessly announced partnerships between mobile operators and banks and the countless apps that pop up in the app stores.

This apparent explosion of services was foretold as a trend that was talked about for a long time, but has been slow to catch on all around the world, not only in Brazil. Welcome to the fight for your pocket and your hard earned money.

In Brazil, then, the launch of partnerships between some of the biggest names in banking such as MasterCard, Visa, Bradesco and the biggest MNO’s like Vivo and Claro is astonishing, as each choose their sides and partners to try to win their fair share of the market and still maintain the profitability of mobile operators, increasingly weakened by excessive competition in mobile prepaid and broadband services.

Careful not to fall behind, the government has studied the issue since May 2012 and issued the Provisional Executive Act 615, which outlines the principles to be observed in the offer of electronic payment services, especially in mobile environments. The Act establishes the Central Bank as the sole regulatory body for this theme, removing authority from ANATEL, and transferring it to the banking regulator, ultimately meaning companies are free to engage in any kind of new partnerships without government supervision.

This new virtual gold rush will reward services that provide clear benefits to users with user friendly experiences, while ensuring that they’re in control throughout

Meanwhile, the services being offered in the AppStores or through the simple use of SMS (without MNO’s interference) are running on the side, gaining valuable ground with the consumer, especially in access services, such as the purchase of tickets for concerts, games, movies or air travel. Also, some specific brand services are appearing, usually from the retail industry, enabling greater customer loyalty through virtual cards for various discounts and benefits.

It is interesting to note that at the end of the day, this new virtual gold rush will reward services that provide clear benefits to users with a user friendly experiences, while ensuring that they’re in control throughout. In Brazil, those who offer credit to consumers classed “C” and “D” (lower middle class to working class; NRS) will also have an advantage in gaining market share.

Considering the scenario, the government’s decision to issue a Provisional Executive Act might seem premature, but make no mistake: establishing  foundations so that everyone knows how the industry will work is essential to preserve our pockets and encourage healthier forms of competition. Since the new regulation establishes that the Central Bank has 6 months to issue a complete regulatory framework to the financial and telecom industries, both of them are following carefully and new services are on hold, at least until the scenario becomes clear.

There’s no doubt, though, that the focus will be to deliver a legal benchmark that allows massive adoption, respecting consumer’s rights and using frictionless methods that can be available to all MNOs at once, therefore improving competition and avoiding exclusive clusters that would be available for too few users.

Regardless of what happens next, your wallet – and your mobile – are thankful.

Rafael Pellon General Manager of MEF LatAm and partner of FAS Attorneys at Law.

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