Mobile Money and Telcos | |
Mobile Money and Telcos | |
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Saturday,
September 21, 2019 / 09:47AM / Contributed by Hogan
Lovells BSTL SC / Header
Image Credit: alamy.com
Introduction
Digital collection
(CoDi) is the latest electronic payment method developed by the Mexican Central
Bank, designed to reduce the use of cash and promote competition, while
incorporating larger sections of the population into the formal financial
sector.
CoDi is a system
that will apply QR codes and near-field communication (NFC) technologies to
operate immediate cashless money transactions between buyers and sellers for
the purchase of low-cost goods and services, using the existing Interbank
Electronic Payment System (SPEI).
In order to partake in CoDi,
buyers will need an account with a financial entity - which is a SPEI
participant - and a smartphone connected to the user's bank's application. On
the other hand, sellers will require either physical QR codes next to their
products or digital ones and a smartphone to send those codes.
CoDi's operation is
designed to be initiated by sellers that will generate and send buyers a charge
for goods or services through electronic messages. Then, buyers will receive
these messages on their mobile devices - through their own bank's applications - and will identify, verify and, if applicable, accept the charges. Once
accepted, the buyer's bank will immediately validate the transfer and liquidate
the amounts for the transaction.
Currently, CoDi mainly targets
the following three types of transaction:
Unlike most electronic money
transactions, transfers made through CoDi:
The downside is that this
payment method will process transactions only up to a maximum of Ps8,000
(approximately US$400).
CoDi's financial market forecast
Most small businesses do not
integrate alternative payment methods due to the commission fees that financial
institutions charge for issuing credit cards and processing payment
transactions. Thus, an important sector of the population still uses cash for
most of their daily purchases.
It is expected that - without the cost of these commissions - small and local businesses will
actively participate in more cashless transactions, which will, therefore,
encourage competition and lead to a broader financial inclusion. It is also
hoped that by removing cash from day-to-day transactions, money laundering and
tax evasion will decrease.
Currently, CoDi is
in its testing and pilot stage - with micro pilots at the internal level of
financial institutions participating in the project which identify operational
issues and resolve them. It is estimated that the second stage will start
between the end of July and the beginning of August 2019.
For the second
stage, CoDi will have a partial launch in three Mexican cities - with a total
population of 430,000 people participating in real transactions. The goal of
this stage is to test how the platform performs in a real ecosystem. If the
second stage proves to be successful, a nation-wide launch will tentatively
occur by the end of September 2019.
Notwithstanding its
launching issues, since CoDi relies entirely on telecoms connectivity to
process payments efficiently, it will also have to face the country's poor
connectivity. Thus, if the government really seeks optimal inclusion of those
that have less access to financial institutions, it must promote greater
connectivity in rural areas - where connectivity is currently scarce.
In addition to
connectivity issues, the system faces many other challenges with users' culture
being one of its main barriers. Thus, CoDi must first generate and nurture
trust among the Mexican population before it can be successful.
Overall, it seems that Mexico is moving forward in financial technologies, and using these developments to promote larger inclusion, competition and transparency for every sector in the country.
For further information on this topic please contact Federico de Noriega or Carlos Romero at Hogan Lovells BSTL by
email (federico.denoriega@hoganlovells.com or carlos.romero@hoganlovells.com).
Credits
The article Cashless
money transactions - Mexico's new payment method first
appeared in ILO Banking on July, 19, 2019.
Other
Relevant CBN Circulars
1.
CBN Issues
Approvals-In-Principle To Three Payment Service Banks - Sep 18, 2019
2. CBN Approves
Charges On Withdrawals And Deposits; Unbundles Charges on Electronic Merchants - Sep 18, 2019
3. CBN Amends Guide
To Charges By Banks And Other Financial Institutions In Nigeria - Sep 10, 2019
4.
Guide To Bank
Charges Circular To All Banks, OFIs And Mobile Payments Operators - 2017 - Apr 2017
Related
News/Links on Bank Charges By Proshare
1.
Bank Charges:
Role, Responsibilities and Rights - Jul 27, 2017
2.
VIDEO: The Role
of Government Is To Protect Consumers - Sola Salako - Jun 13, 2017
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4.
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5.
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CBN Directs
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12.
CBN Extends
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Complying with
CBN's Policy on Cashless Economy - Jun 03, 2013
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16.
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CBN Reviews Retail Cash Withdrawals and Lodgement’s Limits - Mar 19, 2012
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Cashless policy:
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CBN exempts
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Going Cashless-
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Ready for
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CBN partners
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