The following post is part of a two-part series on Modelo Perú.
Today, we are excited to share an issue brief on Modelo Perú, a first-of-its kind payments initiative in Peru. The brief, produced in partnership with The Institute of International Finance, explores the successes and challenges that the initiative has seen since its launch in February 2016.
Spearheaded initially by the Bankers’ Association of Peru (ASBANC), Modelo Perú is an effort to establish an interoperable nationwide payments platform. The platform, Bim (Billetera Móvil), brings together financial institutions, government, telecommunications companies, and large payers and payees into a shared payments infrastructure. It intends to expand banking access to the 71 percent of Peruvians who currently lack a bank account, and aims to reduce the transactions costs associated with cash for both financial service providers and other businesses. Modelo Perú has been lauded as an example of interoperability – with many different players coming together to create one seamless payments ecosystem. About one year after its launch, we wanted to explore how ‘seamless’ it has been.
Through interviews of a variety of stakeholders, we identified key challenges faced in rolling out this massive effort. While many are excited about the platform, they acknowledged that it faced more challenges than expected in the first year. Pagos Digitales Peruanos (PDP), the company set up to run the platform, aimed to reach 300,000 accounts in the program’s first year. At the end of 2016, they had reached 240,000, not far from their enrollment target. Stakeholders, however, are less worried about enrollment and more worried about lower-than-expected transaction numbers. Pilot projects have failed to deliver the expected flow of transactions.
The stakeholders we spoke to identified four key challenges that may have hindered the growth of the platform thus far. Here are a few details on these challenges:
The biggest challenge stakeholders are facing in the implementation of the Bim platform is limited buy-in from agents. The strategy for the roll-out of Bim was to target agents of the largest banks in Peru, many of which are shopkeepers or small-business owners. These agents had previously been completing transactions for customers, including bill payments and withdrawals, through POS systems. As a mobile platform, Bim introduces an alternative to the POS systems, with transactions being completed through mobile phones. To many agents, however, this alternative is not a welcome addition as it has required, among other challenges, agents to become familiar with a new system and have the capacity to operate on two systems.
With the platform roll-out strategy targeting existing agents and networks of large commercial banks, expansion of Bim to rural areas and to unbanked population segments has been greatly limited. Stakeholders highlighted that the uptake of the platform remains concentrated in urban centers and primarily among previously banked customers.
While three different mobile network operators (Entel, Claro, Movistar) are participating in Bim, there are still coverage issues for agents. In some areas, only one of the three operators has a strong signal, which creates connectivity issues for any agents not operating with that network. In other areas, none of the operators had adequate network coverage, leaving agents unable to complete Bim transactions.
As could be expected on a platform with 33 participating institutions, there is growing disagreement about how Bim should proceed, especially given lagging transaction numbers. On one hand, large commercial banks are focused on driving up the volume of transactions, and on the other MFIs and credit unions are more interested in expanding the ecosystem to reach currently underserved locations and unbanked populations.
Even given the challenges above, the progress already made on establishing Bim in Peru is certainly impressive. In part two of this series, we will highlight the potential path forward, looking at solutions for the challenges described above.
For more information on these challenges, and for more on Modelo Perú, read the brief, here.
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