According to the World Bank, there are 2 billion adults worldwide who don’t have a bank account. The non-banked population, pays with cash and has restricted access to the banking system. The main obstacle for banking penetration is price while distance to a branch, lack of documentation, distrust and even religion limit it too.
On the other hand, the banking population can pay with cash, plastic cards and even dematerialized cards held on digital wallets or trough new digital payment mechanisms. Additionally, they can access to 3 types of money:
During “The Future of Digital Payments Conference”, the experts agreed that in middle and long term the use of cash is going to diminish drastically, while, there is uncertainty about cryptocurrency. Therefore, more people should pay their goods and services with digital mechanisms.
In this context, economies such as China and Zimbabwe, with opposite levels of banking penetration, are democratizing the use of e-wallets. For example: In China after buying in any kind of establishment, the question is: cash or Alipay?, where Alipay is an e-wallet that allows contactless payments.
According to the report “The Rise of Fintech in China” by DBS and EY 2016, the main vertical market for the Chinese Fintech activity is Payments and e-wallets where Alibaba and Tenant, current fintech unicorns, lead this category and aggregate debit and credit cards information from different banks in the same wallet. Among the causes that foster the expansion of this vertical market are:
- Unmet financial needs: Low penetration of banking infrastructure compared with USA, Canada and Europe.
- Unmet client expectations by traditional banks.
- Exponential growth of middle class.
- High rate of banking penetration: 79% of people older than 15 have a bank account, Global Findex 2014.
- Exponential growth of digital connectivity; 51.7% of internet penetration mainly by smartphones.
In this context, internet giants such as Alibaba, the biggest e-commerce, and Tencent, leading provider of Internet value added services, financed fintechs. Unlike in the US and Europe where Fintech has been driven by startups or in some cases financial services incumbents.
In Peru, contactless payments are not yet massive, even in the banking population. The industry is facing the following scenario:
- Low rate of banking penetration: 29% of people older than 15 have a bank account, Global Findex 2014.
- Unmet client expectations by traditional banks.
- High growth of digital connectivity; 45.4% of internet penetration, Statista 2016.
- High growth of penetration of smartphones: 7 out of 10 mobiles are smartphones, Market Monitor de Counterpoint Research 2016.
In this context, according to the study “The use of cash in Perú” by BCRP 2017, cash payments represent 90% of retail payments. The main reasons reported to keep cash are safety, ease and price. Customers, both banking and non-banked population, don’t value credit and debit cards attributes, while, in China, trust, loyalty programs and customer experience supported by QR codes have driven the adoption of new technologies.
In the banking segment, Visa and the main banks either have launched or announced contactless functionalities, while, in the non-banked segment, an account linked to a mobile phone has become the alternative to a bank account. In the FinTech ecosystem, BIM and Vippo are 2 different e-wallets designed for the ones with a mobile phone including those without a bank account, however, they do not have a representative market penetration.
To conclude, there are many opportunities to democratize access to digital payments working in a better shopping experience, developing loyalty programs and training people and small business to perceive the upside of adopting new technologies, however, the government, banking incumbents, telcos and FinTechs have to overcome the challenges of security and infrastructure and collaborate to foster financial inclusion.
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RETO-DIGITAL 
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