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Mobile Payments in Brazil: Regulations Bring Leadership and Innovation in the Sector.
Legislative measures are being forwarded to Brazilian Congress on Mobile Payments, primarily because the system does not involve financial companies; which is then a huge potential for new businesses that can provide better services to end users.
According to information published by several newspapers at the end of October, the Communications Minister, Paulo Bernardo, said the government will soon announce a regulatory “mobile payments” legislative measure that has already been forwarded to the Civil House on payments by mobile devices. He said, "Our expectation is to offer a system that will more be added to so many others ...”
We believe that this regulatory approach has much to do with our work over the past ten years in mobile payments technology in Brazil and the United States. From the standpoint of market necessities, there is a basic group of important requirements, which somehow must underpin this work in Brazil and similar regulatory efforts being implemented in other countries as well.
For example, a mobile payment solution must first be compatible with the current stream of authorization and transaction confirmations between merchants and issuers and flags (operators of debit and credit), allowing the sharing, interchange and symbiosis of different flags and different issuers, current and new players. There should be multi-functionality (credit cards, debit and employee benefits), DDA authorizations, fund transfers (TEDs and DOCs – in country similar forms of ACH transactions, P2B, P2P). Certainly it should include a high level of security and safety for end users, current card holders, and businesses; which would significantly help reduce the current costs associated with fraud.
When it comes to coverage where new services will be available, this set of rules must require the platform to be as compatible as possible with all existing models of phones in the user’s pocket today, and all existing mobile operators’ data services. This will allow mass deployment of the services to target audiences at very low costs, and high potential for new related services. Due to the nature of radio wave propagation in places where people may be using their mobile phones for payment, the platform must secure the independence of mobile operators as possible to allow higher quality and reliability of these services.
Current establishments cannot rely solely on existing POS equipment, and should, for example, also be able to communicate via WEB or mobile; all these things implemented in a simple and easy to use fashion from the user’s perspectives and businesses, leaving the complexity of the transactions to be treated in the systems back end.
We do not believe there is any resistance on the part of any of the industry players in the value chain of mobile payment services since the business of "mobile payments" has much to do with the current services that both banks and the telecom companies already offer in market and that easily add much value to the their existing customer base.
We believe that the critical points in various current business models being tested both by major established financial players and new businesses, has to do with contracts that go along the process alone are just to loose and weak to start with, which in practice allow for the easy breaking of these agreements even before the services can become fully adapted. So it is very important to have a business model and a technology platform where the databases of companies involved in the process are protected at all times, but at the same time allow interoperability transactions, along with the highest level of security to maintain the confidential information of each of these companies and banks engaged in this business.
According to the announcement made by the Communications Minister during the IV forum Central Bank Financial Inclusion in October, legislative measures are being forwarded to Congress, primarily because the system does not involve financial companies; which is then a huge potential for new businesses that can provide better services to end users.
According to the Minister, the intent is to provide a tool which is an addition to existing payment means that are now dominated by banks and other financial institutions. According to research produced by the Brazilian Central Bank, 86% of families of classes D and E use cash as the primary form of payment. Use of cash is also high among higher income groups.
Mass adoption of such service by the general population, especially among those where these services will be extremely useful bringing really added value in their lives. For example, it would allow a solution for the payment of bills (boletos) directly from their mobiles, remote shopping, and remote point of order, i.e., by instantly being able to purchase groceries anywhere, instead of needing to be at the supermarket, delivery services, discount coupons, bonus and points programs, shopping card benefits and pensions, money transference, and much more.
According to a survey by Redecard, there are an estimated 17.3 million merchants not served by the current network of POS services.
Money is still a major form of payment. Considering the vast distances we have in Brazil, payment via mobile phones have tremendous potential and, more importantly, to really bring overall improvement of the quality of people’s life, to create new jobs, and to bring digital and financial inclusion of a larger portion of the population.
We see mobile payments as a useful and positive tool which is good for all sectors of industry, commerce and services. Brazil is in the unique and privileged position of being able to lead the world market in this area.
We started several development in this sector back in 2001, and since 2006 we have introducing several initiatives in the area of mobile payments in Brazil, and now with the achievements of the Confederations Cup Football in 2013 World Cup Football in 2014, and with the sophistication and modernity of Brazilian Laws, financial system, telecommunications, and energy it makes us strong believers that Brazil can continue with its "momentum" now and lead the world to important transitions in the electronic payment industry.
(*) Mr. Bianchi has 20 + years’ experience as Managing Director for the Brazilian Government Regulatory Affair, with hands-on experience working from his office based Brasilia, DF, mediating relevant telecommunications subject matters before the Senate, House of Representatives, ANATEL, and other Brazilian telecommunication institutions, for which he represented several major wireless companies’ director of regulatory affairs and interconnection, and was the expert matter liaison and consultant to these companies’ senior executives, to the board of directors and leadership team, and to the presidency. During this period he developed a solid and vast network in the industry. Mr. Bianchi also worked as the Assessor of the Superintendent of Public Services at the National Telecommunications Agency – ANATEL, developing regulations and notices of telephony services for this Brazilian Agency. Airton is currently a Senior Executive Consultant to major national and international companies seeking business operation in Brazil that involved the telecommunication, finance, and energy sectors. Airton Bianchi holds a MBA in Telecommunications, bachelor degrees in Accounting and Business Administration from Euripides Soares da Rocha Educational Foundation, Brazil.
(**) Mr. Silva is a senior business and technology executive, president and CEO of M-CodeOne Mobile Payment Corporation, with extensive experience in mobile payments, strategic planning and business development, software and system development, software architecture, R&D, and wireless systems. Pioneered the mobile payments industry in many ways, and for the last 10+ years had developed a portfolio of over 20 patents pending for various technologies. He founded several startups, raised money and other resources to successfully developing these businesses. Before that he worked for Bell Labs, Motorola, Philips, and Schlumberger in various capacities, for which he always maintained a recorder of great achievements, and received several awards.