In a bid to increase card payments and financial inclusion, Mexican banks are collaborating with mobile payments technology vendors to deploy mPOS solutions at mom-and-pop stores. The Mexican government encourages these initiatives, as around 70 percent of all purchases in Mexico are made with cash and the informal economy represents 30 percent of GDP.
Of Mexico’s 1 million grocery retailers, 64 percent are mom-and-pop stores. “Mom-and-pop stores play a major part in Mexico’s retail economy, yet they lack the tools to compete effectively with larger retailers,” Luz Adriana Ramirez Chavez, Visa Mexico’s country manager, told Mobile Payments Today. “By installing mPOS devices offering retail management software, they can have more control and grow their business. Also, when they start accepting cards, they benefit from higher sales tickets.”
In November 2014, Visa, Mexican tax authority Sistema de Administración Tributaria (SAT/Tax Administration System) and Confederación de Cámaras Nacionales de Comercio, Servicios y Turismo (Concanaco – Servytur/Confederation of National Chambers of Commerce, Services and Tourism) launched Tableta Concanaco, a scheme to provide micro-businesses and SMEs with mPOS technology. In addition to a subsidized mPOS-enabled tablet containing software providing inventory management and electronic invoicing, each business owner gets a Visa debit card on which they receive their customers’ card payments.
“So far, 20,000 tablets with iZettle card readers have been issued as part of the Tableta Concanaco scheme,” said Ramirez Chavez. “Our plan is to issue 100,000 in the first 12 months.”
In addition to the retail market, Visa also wants to provide mPOS solutions for other cash-dominated verticals in Mexico such as transport and door-to-door catalog sales, she said.
Provider iZettle has offered its iOS- and Android-based mPOS card readers in Mexico since June 2013 through a partnership with Spanish bank Banco Santander’s local subsidiary.
According to El Financiero, in December 2014, 50,000 Mexican merchants were using iZettle’s technology. Luis Arceo, iZettle’s Mexican managing director, told the Mexican newspaper the firm is seeing a 30-to-40 percent growth per week in transactions and clients.
Citigroup’s Mexican subsidiary Banamex launched its iOS-based iAcepta Móvil Banamex mPOS card readers using technology supplied by U.S.-based Stratus Technologies and Ecuador’s B-Wise in 2013.
“We offer iAcepta to mom-and-pop stores as well as to larger merchants,” said León Vega, Banamex’s card acceptance director. “Merchants pay MXN 500 ($33.64) for an iAcepta unit. We now have 8,000 iAcepta devices in the market, and in the last few months processed MXN 60 million ($4.04 million) on iAcepta devices. The average value of an iAcepta transaction is MXN 1,784 ($120).”
Since 2012, Banamex has offered NFC and contactless card payments at 60,000 traditional POS terminals in Mexico. “The next step will be to add NFC and contactless card acceptance to our mPOS solution,” said Vega. “So far, iAcepta only accepts EMV chip and mag-stripe cards.”
According to Mexican banking regulator Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission), Mexico had an installed base of 721,151 POS terminals in December 2014, along with 105.4 million debit cards and 27.8 million credit cards.
“Mexico has eight POS terminals per 1,000 inhabitants,” said Ramirez Chavez. “The Latin American average is 11, while Brazil boasts 24 terminals per 1,000 inhabitants.”
“Mexico is underleveraged in terms of POS terminals,” said Ali Raza, a principal at U.S.-based CCG Catalyst Consulting Group. “There’s clear evidence that, when you make payments more efficient in a country, this improves its GDP.”
The Mexican government has been promoting the use of payment cards and POS terminals to promote financial inclusion, for example mandating the payment of welfare benefits to debit card-based accounts and requiring employers to pay employees’ food benefits to prepaid cards instead of through paper vouchers.
In 2011, the government passed legislation allowing four levels of bank account, with different KYC requirements, maximum balances and transaction types.
“Level 1 accounts are basic prepaid accounts and can’t be used with mobile phones for payments and person-to-person transfers,” said Martha Casanova, a consultant at World Bank subsidiary CGAP’s (Consultative Group to Assist the Poor) Technology Program. “Level 2 low-transactionality accounts, Level 3 low-risk accounts and Level 4 full-service accounts can all be linked to mobile phones. As a result of this regulation, a lot of people opened bank accounts with a mobile payment capability, but the reality is that they prefer to use their debit cards rather than their mobile phones for payments.”
Examples of mobile-linked accounts include Banamex’s Cuenta (account) Transfer and its Saldazo account, which is co-branded with Mexican retailer Oxxo and, like Cuenta Transfer, uses Telcel’s mobile network. “Cuenta Transfer and Oxxo Saldazo have been very successful,” says Casanova.
To promote the use of payment cards, the Ministry of Finance launched the Boletazo public-private partnership program, which ended in 2011. The program’s two main components were a lottery system (Boletazo) that entered every card transaction into a raffle for prizes and a program promoting deployment of POS terminals at no cost to merchants.
“Boletazo’s drawback was that many merchants didn’t use their POS terminals as there was no real incentive to do so,” said Vega. “Also, the banks didn’t make much money out of the program. This is why Banamex has been rolling out mPOS technology.”
“I think all the Mexican banks will replace their traditional POS terminals with mPOS devices, as mPOS is cheaper,” said Casanova.
Mexico’s Grupo Bimbo (http://www.grupobimbo.com/en/index.html), one of the largest bakery firms in the world, is an unexpected pioneer in the drive to promote card acceptance by mom-and-pop stores. It is working with Banamex, Visa, and prepaid airtime network operator Blue Label Mexico to roll out wireless POS terminals at stores selling Grupo Bimbo products.
Visa said in an October 2013 news release that New York-based Planet Payment operates the payment processing platform for the initiative.
As of February 2015, Blue Label Mexico, a joint venture between Grupo Bimbo and South Africa’s Blue Label Telecoms, has installed 75,000 wireless terminals at mom-and-pop stores as part of its Red Qiubo payments network. All these terminals offer mobile airtime top-up and bill payments, and so far 32,000 have been enabled to accept card payments. Merchants pay a small fee to install their terminal.
In addition to acting as transaction acquirer, Banamex provides merchants participating in Red Qiubo with Cuenta Transfer mobile bank accounts, so they can receive payment for their customers’ card transactions. Banamex also plans to offer banking correspondent services at stores participating in Red Qiubo, so customers can withdraw or deposit cash from their bank accounts using the terminals.
“Our vision is to create the largest electronic services network in Mexico,” said Hortencia Contreras, Grupo Bimbo’s vice president of strategic services and blue label Mexico’s CEO. “We see the installation of POS systems in merchants as a way to promote financial inclusion because of the impact stores have in local communities. So far, the average number of credit and debit card transactions handled by our terminals is 50 a month. The average value is MXN 85-MXN 100 ($5.71-$6.73) per transaction.”
“The initial target is to install 120,000 wireless terminals at mom-and-pop stores as part of Grupo Bimbo’s initiative,” said Banamex’s Vega.
Grupo Bimbo and its partners have had to educate mom-and-pop stores about the benefits of accepting cards. “Some merchants are reluctant to take cards as they don’t want to become liable for tax,” said Contreras. “Others don’t understand the benefits such as higher average sales tickets due to purchases not being limited by the amount of cash customers are carrying. So we’ve had to devise programs to incentivize merchants to accept card payments and customers to use their cards.”
Contreras said that mom-and-pop stores that accept card payments are able to take payments from customers’ food benefits cards, a service that has previously only been available at large convenience stores and supermarkets.
Other players in the Mexican mPOS market include Canada’s AnywhereCommerce, Mexico’s Sr. Pago (Señor Pago), and U.S.-based Mozido.
AnywhereCommerce is working with Mexican card payments switch Prosa to supply mPOS technology to Prosa’s member banks. “The Prosa member banks provide their merchants with our mPOS card readers,” said Bill Nichols, AnywhereCommerce’s CEO. “Transactions are passed through a wireless link from the merchant’s device to our hosted gateway which then passes them through Prosa to the acquiring bank. So far, we have several banks piloting our system.”
In June 2014, Sr. Pago launched the Sr. Pago Card System. Provided in conjunction with MasterCard and Mexican microfinance institution Te Creemos, the Sr. Pago Card System combines a smartphone-based chip card reader with a debit card that can be reloaded with payments accepted through the card reader.
“Mozido has implemented a tablet-based mPOS solution for mom-and-pop stores in Southeast Mexico,” said Juan Piña, Mozido Latin America’s president. “This solution offer loyalty programs, remittances, offers and promotions, store management, card acceptance, bill pay and airtime top-up.”
Mozido aims to provide its mobile payment solution in 2,000 convenience stores in Mexico by the end of 2015, according to El Economista. Raúl Ávila, Mozido Mexico’s managing director, told the Mexican newspaper that merchants using Mozido’s technology have seen sales increase by 15 percent as a result of offering services such as airtime, utility bill payments and card acceptance.