April 26, 2018
The Modelo Perú initiative was introduced in 2016 to provide an interoperable nationwide digital payments platform, called BiM (Billetera Móvil), to extend financial services to the over 70% of Peruvians who lack access to the formal financial sector, or approximately 10 million unbanked or underbanked people. It also aims to significantly reduce transaction costs for financial service providers and other businesses through the use of mobile money instead of cash. Led by the Peruvian Bankers Association (ASBANC), Modelo Perú is a collaboration among the country’s largest commercial banks and financial institutions, its four telecom companies, and microfinance organizations, most of which already had their own individual Point-of-Sale (POS) networks and electronic wallets to facilitate transactions. Modelo Perú connected these platforms, their agents, ATMs, and bank branches into one network and worked with lawmakers to establish national e-money regulations to best deliver financial services to underbanked Peruvians, especially those in remote areas.
“We are creating this physical network in places where banks don’t yet exist,” says Miguel Arce Tellez, the Commercial Director of Pagos Digitales Peruanos (PDP), the collaborative entity that designed and now manages the BiM platform and which is majority-owned by ASBANC’s financial education institute. By expanding its BiM agent network from 5,000 currently to at least 20,000 agents by the end of 2018, in addition to the 40,000 points already connected by its partner banks, Miguel is confident the BiM platform will soon become Peru’s largest digital network for cash-in/cash-out and over-the-counter services.
While working at ScotiaBank Peru, Miguel and his colleagues from other banks proposed the idea to the Bankers Association of creating an interoperable nationwide platform available to all Peruvians at any time. With 33 participating institutions, each of which had different visions of how BiM should proceed – with banks focused on boosting the number of transactions and others more keen on reaching new customers – it took some finessing to get all parties on board. BiM’s early successes convinced its skeptics. “When the other banks saw their competitors benefiting from this, they joined.”
Now, through social media and word-of-mouth, Modelo Perú is hoping to reach at least five million Peruvians in the next five years, up from the 430,000 who are using the BiM platform now, to enable customers to send money anywhere in the country through a single platform in real-time, which had not been previously available in Peru.
“This is a different way to think than traditional banking,” Miguel says. “We are approaching the base of the pyramid with an alternative to cash, but with the goal to do a lot of bigger things in the meantime through the cell phone.”
These include increasing the volume of P2P remittances, introducing e-commerce to Peru, in partnership with one of the industry’s global leaders, and to support the government in delivering social services to hard-to-reach populations. PDP is also working with local MFIs to create a network of agents who can coach rural populations on how to use the platform. It will also continue to refine its services to reach populations with limited or no mobile network coverage and accelerate uptake outside of urban centers. PDP is now working with Ericcson to allow for BiM transactions to be conducted on the individual banks’ own POS systems, which are more familiar to the banks’ agents.
The global financial inclusion industry is looking at the Modelo Perú experience as a possible blueprint for other countries that face similar challenges in mobilizing digital financial solutions to reach the unserved and underserved. At present, most of the world’s digital payments platforms are owned by an individual company or small group of financial institutions in alliance with a single telecommunications company, meaning that payments are only accepted by account holders of those companies. BiM’s interoperability, on the other hand, allows users to conduct all necessary transactions with all financial institutions and other e-money issuers, as well as government, telcos, and large payers and payees in Peru, which makes the experience seamless for both the customer and the financial institutions.
BiM’s early growth has been slower than expected, with the number of transactions on the platform well below initial projections and expansion into unbanked and marginalized rural communities hindered by the lack of mobile coverage and the participating banks’ preference to first serve their existing, largely urban, client base.
However, through trial and error and the efforts of its many different partners, Modelo Perú’s BiM platform is increasingly helping to improve financial inclusion through the creation of the country’s first digital payments ecosystem.
The Stability Innovation Atlas team, led by FHI 360 and funded by the Rockefeller Foundation, will release their finished product in Spring 2018. The complete Atlas will feature economic stability-enhancing innovations that empower the world’s poor and vulnerable people in managing and investing with confidence in their future. We will be profiling several innovators and innovations that were identified during the research and crowd-sourcing process over the coming weeks and months.