Mobile Banking to Reach 65% of the Country Off the Banking Map

Six months from now, people all over Peru will be able to begin paying their bodega bills or buying their neighbor’s cow by mobile phone. 

President Ollanta Humala enacted a law Wednesday authorizing the introduction of mobile banking, aimed at helping millions of Peruvians who have poor or no access to banks or ATMs to safely pay and be paid without the need of physical cash.

The system is expected to be implemented in July. 

Humala said the law was made “to help the most poor, who have difficult access to banks.”  Government figures show that 65% of districts nationwide have no local access to financial services, and only 28% of the adult population uses banks. In contrast, 95% of the districts nationwide have telephone coverage, and there are more than 32 million mobile phones currently in use.

The service is to be offered by banks, savings and loans institutions, and new companies that specialize in the system, who will register as electronic money issuing companies, EEDE. 

Using a pin number, phone owners can either link to their savings or checking account or purchase money to deposit to their phone number.  They will be able to pay bills, make retail purchases, or have access to cash at any business using the system. The limit per transaction is to be the equivalent of one tax unit (UIT), currently S/. 3,700.

According to Scotiabank’s innovation channels manager in Lima, Miguel Arce, small retailers are the segment that will be quickest to use this electronic payment system, including small shops and remittance businesses. There is also a vast ‘network’ of people who are paid in cash, including gardeners, seamstresses, even taxi drivers.

“Approximately $15 billion moves in the retail business per year.  About six percent of these transactions are done through banks, which means that $10 billion moves in cash through bodegas, hardware stores and others, all of which use cell phones,” Arce told La Republica daily when the bill was put forth in Congress.

President Humala said the government is planning to use the system to distribute assistance in the social programs. “A beneficiary on the Juntos program or Pension 65 and who lives in Surcubamba, Huancavelica, where there are no commercial banks, will no longer have to travel for hours to collect their pension or stipend,” the President said.   

Humala also said the law should be a wake-up call to private banking, “which has huge profits but does not go into the interior of the country, where there is a great lack of services.” 

“We’re talking about an instrument that will allow financial inclusion and social inclusion. You should know that 65 percent of districts have no financial services, and yet 95 percent of them have telephone coverage.”

Congress now has 90 days to draw up the regulations to the law in order to implement the law.

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