Editor's Note: This article first appeared in SellingPrepaid E-Magazine, Oct. 8, 2008, issue 08:10:A. For more information on the prepaid sphere, visit www.sellingprepaid.com.
According to a recent webinar on prepaid opportunities in Latin America, 70 percent of Latin Americans do not have bank accounts. Latin America, which comprises 29 countries stretching from Mexico to Argentina, has a population of 546 million. So the unbanked in Latin America represent over 380 million potential customers for prepaid cards.
In the Prepaid Expo 2009 webinar entitled "Identifying and Capitalizing on the Rise of Prepaid in Latin America," Anabel Perez, President and Chief Executive Officer at Miami-based processor NovoPayment Inc., said, "Prepaid is an ideal solution for this market because it is based on stored value and provides the best opportunity to meet the three a's."
The three a's are affordability, accessibility and availability.
According to Perez, the average unbanked worker in Latin America makes less than $2,000 a year. Typically, such workers - taxi drivers, laborers, maids, street vendors and so forth - are paid in cash. Their low incomes prevent such consumers from opening bank accounts.
Often, the unbanked are forced to pay their bills in person, which means transportation costs to and from the bill paying location, not to mention the approximately 10 hours per month in job productivity lost.
Although these consumers make a living and are not considered homeless (they routinely build makeshift houses on property they do not own and have informal access to basic services such as water and electricity), Perez said they are excluded from the payment infrastructure utilized by more forutnate Latin Americans.
Prepaid, therefore, has the potential to prove these individuals' "income history, secure their money [and] lower the costs of transactions for all of the parties," Perez said.
But, as Perez joked, the prepaid value chain in Latin America is missing a few links. Absent components include program managers and processors.
"Few of our card processors within the region are equipped with specialized prepaid programs," Perez said.
She added that card network infrastructures are in place but that reload capabilities for prepaid users are lacking; access points, such as POS terminals and ATMs, are not located close to where the unbanked live. Packaging and fulfillment capabilities, as well as formal sales and distribution channels, are also underdeveloped in the region.
Perez called the process of integrating the unbanked into the global, electronic transaction-driven economy a challenge, but she said the "rewards are unmistakable."
Perez reported mobile phone penetration has grown rapidly, exceeding 61 percent of the entire Latin American population. Of those mobile phone users, 90 percent are prepaid phone users. That combined statistic illustrates the Latin American unbanked are ready to utilize prepaid cards in other ways.
NovoPayment conducted a six-month study that measured various financial and social metrics of 15 Latin American countries. Based on the study, NovoPayment estimated that, by 2015, more than 300 million unbanked Latin Americans would have a purchasing power of more than 200 billion per year using general purpose reloadable prepaid cards.
By integrating populations that exist on the margins of society, prepaid programs can stimulate economic growth in depressed economies and help government agencies facilitate faster and more efficient food and health care distribution pathways.
Perez emphasized that businesses must work to understand the social situations and financial needs of the Latin American unbanked. NovoPayment is working to implement prepaid programs at cyber cafes located at the base of mountains or near certain neighborhoods - where the unbanked work and live.
By incorporating cafes into the prepaid infrastructure, NovoPayment is proactively reaching out to its targeted consumer base, not waiting for them to find NovoPayment.
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